Deere Reports Third-Quarter Net Income of $899 Million

Deere Reports Third-Quarter Net Income of $899 Million

– Quarterly sales decline 3% to $8.97 billion.

– Continued uncertainty in agricultural sector weighs on results.

– Construction & Forestry reports sharply higher profit.

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

Canada NewsWire

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

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


Deere & Company

Third Quarter

Year to Date


$ in millions

2019

2018

% Change

2019

2018

% Change

Net income – adjusted

$

867

$

849

2%

$

2,505

$

2,325

8%

Fully diluted EPS – adjusted

$

2.71

$

2.59

$

7.79

$

7.08

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

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

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


Company Outlook & Summary

Company equipment sales are projected to increase by about 4 percent for fiscal 2019 compared with 2018. Included in the forecast are Wirtgen results for the full fiscal year of 2019 compared with 10 months of the prior year. This adds about 1 percent to the company’s net sales forecast for the current year. Also included is a negative foreign-currency translation effect of about 2 percent for the year. Net sales and revenues are projected to increase about 5 percent for fiscal 2019. Net income attributable to Deere & Company is forecast to be about $3.2 billion.

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


Deere & Company

Third Quarter

Year to Date


$ in millions

2019

2018

% Change

2019

2018

% Change

Net sales and revenues

$

10,036

$

10,308

-3%

$

29,362

$

27,942

5%

Net income

$

899

$

910

-1%

$

2,532

$

1,584

60%

Fully diluted EPS

$

2.81

$

2.78

$

7.87

$

4.82

Net income – adjusted

$

867

$

849

2%

$

2,505

$

2,325

8%

Fully diluted EPS – adjusted

$

2.71

$

2.59

$

7.79

$

7.08

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


Equipment Operations

Third Quarter

Year to Date


$ in millions

2019

2018

% Change

2019

2018

% Change

Net sales

$

8,969

$

9,286

-3%

$

26,182

$

25,007

5%

Operating profit

$

990

$

1,087

-9%

$

2,932

$

2,822

4%

Net income

$

717

$

750

-4%

$

2,067

$

889

133%

Tax reform unfavorable

(favorable) adjustments

(24)

(58)

-59%

(24)

974

-102%

Net income without tax reform

$

693

$

692

$

2,043

$

1,863

10%

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


Agriculture & Turf

Third Quarter

Year to Date


$ in millions

2019

2018

% Change

2019

2018

% Change

Net sales

$

5,946

$

6,293

-6%

$

17,909

$

17,585

2%

Operating profit

$

612

$

806

-24%

$

1,978

$

2,249

-12%

Operating margin

10.3%

12.8%

11.0%

12.8%

Agriculture & Turf sales decreased for the quarter due to lower shipment volumes and the unfavorable effects of currency translation, partially offset by price realization. Year-to-date sales increased mainly as a result of price realization and increased shipment volumes, partially offset by the unfavorable effects of currency translation. Operating profit declined for the quarter primarily due to lower shipment volumes, higher production costs, and the unfavorable effects of foreign-currency exchange, partially offset by price realization. Nine-month operating profit moved lower resulting from higher production costs, the unfavorable effects of currency translation, increased research and development costs, and a less-favorable sales mix. These factors were partially offset by price realization and higher shipment volumes. 


Construction & Forestry

Third Quarter

Year to Date


$ in millions

2019

2018

% Change

2019

2018

% Change

Net sales

$

3,023

$

2,993

1%

$

8,273

$

7,422

11%

Operating profit

$

378

$

281

35%

$

954

$

573

66%

Operating margin

12.5%

9.4%

11.5%

7.7%

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


Financial Services

Third Quarter

Year to Date


$ in millions

2019

2018

% Change

2019

2018

% Change

Net income

$

175

$

151

16%

$

450

$

681

-34%

Tax reform unfavorable (favorable) adjustments

(8)

(3)

167%

(3)

(233)

-99%

Net income without tax reform

$

167

$

148

13%

$

447

$

448

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


Market Conditions and Outlook (annual)


$ in millions

Agriculture & Turf

Net Sales

2%

Currency Translation

-2%

Construction & Forestry

Net Sales

10%

Currency Translation

-2%

John Deere Financial

Net Income

$ 620

Agriculture & Turf. Industry sales of agricultural equipment are expected to be about the same as last year for the U.S. and Canada as well as for the EU28-member nations. South American industry sales of tractors and combines are projected to be flat to up 5 percent benefiting from strength in Brazil. Asian sales are forecast to be flat to down slightly. Industry sales of turf and utility equipment in the U.S. and Canada are expected to be flat to up 5 percent for 2019.

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

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

John Deere Capital Corporation

The following is disclosed on behalf of the company’s financial services subsidiary, John Deere Capital Corporation (JDCC), in connection with the disclosure requirements applicable to its periodic issuance of debt securities in the public market.

Third Quarter

Year to Date


$ in millions

2019

2018

% Change

2019

2018

% Change

Revenue

$

742

$

661

12%

$

2,106

$

1,864

13%

Net income

$

145

$

120

21%

$

351

$

639

-45%

Ending portfolio balance

$

38,625

$

35,633

8%

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

APPENDIX

DEERE & COMPANY
SUPPLEMENTAL STATEMENT OF CONSOLIDATED INCOME INFORMATION
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(Millions, except per-share amounts)
(Unaudited)

In addition to reporting financial results in conformity with accounting principles generally accepted in the United States (GAAP), the company also discusses non-GAAP measures that exclude adjustments related to tax reform. Net income attributable to Deere & Company and diluted earnings per share measures that exclude this item are not in accordance with nor a substitute for GAAP measures. The company believes that discussion of results excluding this item provides a useful analysis of ongoing operating trends.

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

Three Months Ended

Nine Months Ended

July 28, 2019

July 28, 2019

Net Income

Net Income

Attributable to

Diluted

Attributable to

Diluted

Deere &

Earnings

Deere &

Earnings

Company

Per Share

Company

Per Share

GAAP measure

$

899

$

2.81

$

2,532

$

7.87

Discrete tax reform expense (benefit)

(32)

(.10)

(27)

(.08)

Non-GAAP measure

$

867

$

2.71

$

2,505

$

7.79

Three Months Ended

Nine Months Ended

July 29, 2018

July 29, 2018

Net Income

Net Income

Attributable to

Diluted

Attributable to

Diluted

Deere &

Earnings

Deere &

Earnings

Company

Per Share

Company

Per Share

GAAP measure

$

910

$

2.78

$

1,584

$

4.82

Discrete tax reform expense (benefit)

(61)

(.19)

741

2.26

Non-GAAP measure

$

849

$

2.59

$

2,325

$

7.08

Safe Harbor Statement

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995:  Statements under “Company Outlook & Summary,” “Market Conditions & Outlook,” and other forward-looking statements herein that relate to future events, expectations, and trends involve factors that are subject to change, and risks and uncertainties that could cause actual results to differ materially.  Some of these risks and uncertainties could affect particular lines of business, while others could affect all of the company’s businesses.

The company’s agricultural equipment business is subject to a number of uncertainties including the factors that affect farmers’ confidence and financial condition.  These factors include demand for agricultural products, world grain stocks, weather conditions, soil conditions, harvest yields, prices for commodities and livestock, crop and livestock production expenses, availability of transport for crops, trade restrictions and tariffs, global trade agreements (e.g., the North American Free Trade Agreement), the level of farm product exports (including concerns about genetically modified organisms), the growth and sustainability of non-food uses for some crops (including ethanol and biodiesel production), real estate values, available acreage for farming, the land ownership policies of governments, changes in government farm programs and policies, international reaction to such programs, changes in and effects of crop insurance programs, changes in environmental regulations and their impact on farming practices, animal diseases (e.g., African swine fever) and their effects on poultry, beef and pork consumption and prices and on livestock feed demand, and crop pests and diseases.

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

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

All of the company’s businesses and its results are affected by general economic conditions in the global markets and industries in which the company operates; customer confidence in general economic conditions; government spending and taxing; foreign currency exchange rates and their volatility, especially fluctuations in the value of the U.S. dollar; interest rates; inflation and deflation rates; changes in weather patterns; the political and social stability of the global markets in which the company operates; the effects of, or response to, terrorism and security threats; wars and other conflicts; natural disasters; and the spread of major epidemics.

Significant changes in market liquidity conditions, changes in the company’s credit ratings and any failure to comply with financial covenants in credit agreements could impact access to funding and funding costs, which could reduce the company’s earnings and cash flows.  Financial market conditions could also negatively impact customer access to capital for purchases of the company’s products and customer confidence and purchase decisions, borrowing and repayment practices, and the number and size of customer loan delinquencies and defaults.  A debt crisis, in Europe or elsewhere, could negatively impact currencies, global financial markets, social and political stability, funding sources and costs, asset and obligation values, customers, suppliers, demand for equipment, and company operations and results.  The company’s investment management activities could be impaired by changes in the equity, bond and other financial markets, which would negatively affect earnings.

The anticipated withdrawal of the United Kingdom from the European Union and the perceptions as to the impact of the withdrawal may adversely affect business activity, political stability and economic conditions in the United Kingdom, the European Union and elsewhere.  The economic conditions and outlook could be further adversely affected by (i) the uncertainty concerning the timing and terms of the exit, (ii) new or modified trading arrangements between the United Kingdom and other countries, (iii) the risk that one or more other European Union countries could come under increasing pressure to leave the European Union, or (iv) the risk that the euro as the single currency of the Eurozone could cease to exist.  Any of these developments, or the perception that any of these developments are likely to occur, could affect 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).


Third Quarter 2019 Press Release

(in millions of dollars)

Unaudited

Three Months Ended

Nine Months Ended

July 28

July 29

%

July 28

July 29

%

2019

2018

Change

2019

2018

Change

Net sales and revenues:

Agriculture and turf

$

5,946

$

6,293

-6

$

17,909

$

17,585

+2

Construction and forestry

3,023

2,993

+1

8,273

7,422

+11

Total net sales

8,969

9,286

-3

26,182

25,007

+5

Financial services

910

830

+10

2,650

2,402

+10

Other revenues

157

192

-18

530

533

-1

Total net sales and revenues

$

10,036

$

10,308

-3

$

29,362

$

27,942

+5

Operating profit: *

Agriculture and turf

$

612

$

806

-24

$

1,978

$

2,249

-12

Construction and forestry

378

281

+35

954

573

+66

Financial services

204

196

+4

566

591

-4

Total operating profit

1,194

1,283

-7

3,498

3,413

+2

Reconciling items **

(74)

(84)

-12

(218)

(305)

-29

Income taxes

(221)

(289)

-24

(748)

(1,524)

-51

Net income attributable to Deere & Company

$

899

$

910

-1

$

2,532

$

1,584

+60

*

Operating profit is income from continuing operations before corporate expenses, certain external interest expense, certain foreign exchange gains and losses, and income taxes. Operating profit of the financial services segment includes the effect of interest expense and foreign exchange gains or losses.

**

Reconciling items are primarily corporate expenses, certain external interest expense, certain foreign exchange gains and losses, pension and postretirement benefit costs excluding the service cost component, and net income attributable to noncontrolling interests.

 

DEERE & COMPANY

STATEMENT OF CONSOLIDATED INCOME

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

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

2019

2018


Net Sales and Revenues

Net sales

$

8,969

$

9,286

Finance and interest income

884

786

Other income

183

236

Total

10,036

10,308


Costs and Expenses

Cost of sales

6,870

7,152

Research and development expenses

431

416

Selling, administrative and general expenses

896

913

Interest expense

374

291

Other operating expenses

352

346

Total

8,923

9,118


Income of Consolidated Group before Income Taxes

1,113

1,190

Provision for income taxes

221

289


Income of Consolidated Group

892

901

Equity in income of unconsolidated affiliates

7

10


Net Income

899

911

Less: Net income attributable to noncontrolling interests

1


Net Income Attributable to Deere & Company

$

899

$

910


Per Share Data

Basic

$

2.84

$

2.81

Diluted

$

2.81

$

2.78


Average Shares Outstanding

Basic

315.9

323.5

Diluted

319.8

328.0

See Condensed Notes to Interim Consolidated Financial Statements.

 

DEERE & COMPANY

STATEMENT OF CONSOLIDATED INCOME

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

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

2019

2018


Net Sales and Revenues

Net sales

$

26,182

$

25,007

Finance and interest income

2,537

2,263

Other income

643

672

Total

29,362

27,942


Costs and Expenses

Cost of sales

20,056

19,190

Research and development expenses

1,295

1,188

Selling, administrative and general expenses

2,607

2,557

Interest expense

1,078

881

Other operating expenses

1,063

1,034

Total

26,099

24,850


Income of Consolidated Group before Income Taxes

3,263

3,092

Provision for income taxes

748

1,524


Income of Consolidated Group

2,515

1,568

Equity in income of unconsolidated affiliates

20

18


Net Income

2,535

1,586

Less: Net income attributable to noncontrolling interests

3

2


Net Income Attributable to Deere & Company

$

2,532

$

1,584


Per Share Data

Basic

$

7.98

$

4.90

Diluted

$

7.87

$

4.82


Average Shares Outstanding

Basic

317.3

323.4

Diluted

321.5

328.2

See Condensed Notes to Interim Consolidated Financial Statements.

 

DEERE & COMPANY

CONDENSED CONSOLIDATED BALANCE SHEET

(In millions of dollars) Unaudited

July 28

October 28

July 29

2019

2018

2018


Assets

Cash and cash equivalents

$

3,383

$

3,904

$

3,923

Marketable securities

565

490

488

Receivables from unconsolidated affiliates

54

22

28

Trade accounts and notes receivable – net

6,758

5,004

6,208

Financing receivables – net

27,049

27,054

25,213

Financing receivables securitized – net

5,200

4,022

4,662

Other receivables

1,535

1,736

1,300

Equipment on operating leases – net

7,269

7,165

6,805

Inventories

6,747

6,149

6,239

Property and equipment – net

5,798

5,868

5,638

Investments in unconsolidated affiliates

219

207

199

Goodwill

3,013

3,101

3,047

Other intangible assets – net

1,444

1,562

1,581

Retirement benefits

1,431

1,298

737

Deferred income taxes

1,088

808

1,645

Other assets

1,977

1,718

1,677


Total Assets

$

73,530

$

70,108

$

69,390


Liabilities and Stockholders’ Equity


Liabilities

Short-term borrowings

$

11,142

$

11,062

$

11,004

Short-term securitization borrowings

5,048

3,957

4,528

Payables to unconsolidated affiliates

136

129

111

Accounts payable and accrued expenses

9,390

10,111

9,483

Deferred income taxes

507

556

524

Long-term borrowings

29,242

27,237

26,838

Retirement benefits and other liabilities

5,781

5,751

6,522

Total liabilities

61,246

58,803

59,010

Redeemable noncontrolling interest

14

14

14


Stockholders’ Equity

Total Deere & Company stockholders’ equity

12,266

11,288

10,356

Noncontrolling interests

4

3

10

Total stockholders’ equity

12,270

11,291

10,366


Total Liabilities and Stockholders’ Equity

$

73,530

$

70,108

$

69,390

See Condensed Notes to Interim Consolidated Financial Statements.

 

DEERE & COMPANY

STATEMENT OF CONSOLIDATED CASH FLOWS

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

(In millions of dollars) Unaudited

2019

2018


Cash Flows from Operating Activities

Net income

$

2,535

$

1,586

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

Provision for credit losses

58

66

Provision for depreciation and amortization

1,522

1,445

Share-based compensation expense

63

63

Gain on sales of businesses

(25)

Undistributed earnings of unconsolidated affiliates

10

(10)

Provision (credit) for deferred income taxes

(332)

641

Changes in assets and liabilities:

Trade, notes, and financing receivables related to sales

(2,206)

(2,365)

Inventories

(1,168)

(1,539)

Accounts payable and accrued expenses

(306)

213

Accrued income taxes payable/receivable

253

176

Retirement benefits

40

(814)

Other

(65)

(109)

Net cash provided by (used for) operating activities

404

(672)


Cash Flows from Investing Activities

Collections of receivables (excluding receivables related to sales)

12,685

12,162

Proceeds from maturities and sales of marketable securities

72

56

Proceeds from sales of equipment on operating leases

1,171

1,116

Proceeds from sales of businesses, net of cash sold

133

Cost of receivables acquired (excluding receivables related to sales)

(13,662)

(12,586)

Acquisitions of businesses, net of cash acquired

(5,171)

Purchases of marketable securities

(110)

(101)

Purchases of property and equipment

(756)

(571)

Cost of equipment on operating leases acquired

(1,462)

(1,428)

Other

(67)

(103)

Net cash used for investing activities

(2,129)

(6,493)


Cash Flows from Financing Activities

Increase (decrease) in total short-term borrowings

(336)

1,183

Proceeds from long-term borrowings

7,440

5,739

Payments of long-term borrowings

(4,356)

(4,372)

Proceeds from issuance of common stock

133

209

Repurchases of common stock

(880)

(454)

Dividends paid

(703)

(583)

Other

(82)

(66)

Net cash provided by financing activities

1,216

1,656


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

(24)

71


Net Decrease in Cash, Cash Equivalents, and Restricted Cash

(533)

(5,438)


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

4,015

9,467


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

$

3,482

$

4,029

See Condensed Notes to Interim Consolidated Financial Statements.

 


Condensed Notes to Interim Consolidated Financial Statements (Unaudited)

(1)

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

Three Months Ended

Nine Months Ended

July 28

July 29

July 28

July 29

2019

2018

2019

2018

Dividends declared

$

.76

$

.69

$

2.28

$

1.89

Dividends paid

$

.76

$

.60

$

2.21

$

1.80

(2)

The calculation of basic net income per share is based on the average number of shares outstanding. The calculation of diluted net income per share recognizes any dilutive effect of share-based compensation.

(3)

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

(4)

The consolidated financial statements represent the consolidation of all Deere & Company’s subsidiaries. In the supplemental consolidating data in Note 5 to the financial statements, “Equipment Operations” include the Company’s agriculture and turf operations and construction and forestry operations with “Financial Services” reflected on the equity basis.

 

(5) SUPPLEMENTAL CONSOLIDATING DATA

STATEMENT OF INCOME

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

(In millions of dollars) Unaudited

EQUIPMENT OPERATIONS*

FINANCIAL SERVICES

2019

2018

2019

2018


Net Sales and Revenues

Net sales

$

8,969

$

9,286

Finance and interest income

30

31

$

952

$

852

Other income

185

231

51

67

Total

9,184

9,548

1,003

919


Costs and Expenses

Cost of sales

6,871

7,153

Research and development expenses

431

416

Selling, administrative and general expenses

751

769

147

145

Interest expense

67

52

311

250

Interest compensation to Financial Services

93

86

Other operating expenses

64

80

339

326

Total

8,277

8,556

797

721


Income of Consolidated Group before Income Taxes

907

992

206

198

Provision for income taxes

190

242

31

47


Income of Consolidated Group

717

750

175

151


Equity in Income of Unconsolidated Subsidiaries and Affiliates

Financial Services

175

151

Other

7

10

Total

182

161


Net Income

899

911

175

151

Less: Net income attributable to noncontrolling interests

1


Net Income Attributable to Deere & Company

$

899

$

910

$

175

$

151

* Deere & Company with Financial Services on the equity basis.

The supplemental consolidating data is presented for informational purposes. Transactions between the “Equipment Operations” and “Financial Services” have been eliminated to arrive at the consolidated financial statements.

 

SUPPLEMENTAL CONSOLIDATING DATA (Continued)

STATEMENT OF INCOME

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

(In millions of dollars) Unaudited

EQUIPMENT OPERATIONS*

FINANCIAL SERVICES

2019

2018

2019

2018


Net Sales and Revenues

Net sales

$

26,182

$

25,007

Finance and interest income

79

70

$

2,727

$

2,441

Other income

614

631

184

195

Total

26,875

25,708

2,911

2,636


Costs and Expenses

Cost of sales

20,058

19,192

Research and development expenses

1,295

1,188

Selling, administrative and general expenses

2,191

2,159

422

403

Interest expense

182

226

910

675

Interest compensation to Financial Services

254

228

Other operating expenses

203

219

1,008

962

Total

24,183

23,212

2,340

2,040


Income of Consolidated Group before Income Taxes

2,692

2,496

571

596

Provision (credit) for income taxes

625

1,607

123

(83)


Income of Consolidated Group

2,067

889

448

679


Equity in Income of Unconsolidated Subsidiaries and Affiliates

Financial Services

450

681

2

2

Other

18

16

Total

468

697

2

2


Net Income

2,535

1,586

450

681

Less: Net income attributable to noncontrolling interests

3

2


Net Income Attributable to Deere & Company

$

2,532

$

1,584

$

450

$

681

* Deere & Company with Financial Services on the equity basis.

The supplemental consolidating data is presented for informational purposes. Transactions between the “Equipment Operations” and “Financial Services” have been eliminated to arrive at the consolidated financial statements.

 

SUPPLEMENTAL CONSOLIDATING DATA (Continued)

CONDENSED BALANCE SHEET

(In millions of dollars) Unaudited

EQUIPMENT OPERATIONS*

FINANCIAL SERVICES

July 28

October 28

July 29

July 28

October 28

July 29

2019

2018

2018

2019

2018

2018


Assets

Cash and cash equivalents

$

2,694

$

3,195

$

2,803

$

689

$

709

$

1,120

Marketable securities

5

8

11

560

482

477

Receivables from unconsolidated subsidiaries and affiliates

2,395

1,700

1,795

Trade accounts and notes receivable – net

1,606

1,374

1,586

6,807

4,906

6,080

Financing receivables – net

100

93

78

26,949

26,961

25,135

Financing receivables securitized – net

54

76

90

5,146

3,946

4,572

Other receivables

1,428

1,010

1,131

126

776

176

Equipment on operating leases – net

7,269

7,165

6,805

Inventories

6,747

6,149

6,239

Property and equipment – net

5,753

5,821

5,592

45

47

46

Investments in unconsolidated subsidiaries and affiliates

5,309

5,231

4,992

16

15

15

Goodwill

3,013

3,101

3,047

Other intangible assets – net

1,444

1,562

1,581

Retirement benefits

1,374

1,241

727

57

57

14

Deferred income taxes

1,579

1,503

1,984

72

69

68

Other assets

1,269

1,133

1,148

708

587

530


Total Assets

$

34,770

$

33,197

$

32,804

$

48,444

$

45,720

$

45,038


Liabilities and Stockholders’ Equity


Liabilities

Short-term borrowings

$

1,372

$

1,434

$

789

$

9,770

$

9,628

$

10,215

Short-term securitization borrowings

53

75

90

4,995

3,882

4,438

Payables to unconsolidated subsidiaries and affiliates

136

129

111

2,341

1,678

1,766

Accounts payable and accrued expenses

9,422

9,383

9,047

1,641

2,056

1,902

Deferred income taxes

454

497

431

616

823

500

Long-term borrowings

5,364

4,714

5,526

23,878

22,523

21,312

Retirement benefits and other liabilities

5,685

5,660

6,430

97

91

96

Total liabilities

22,486

21,892

22,424

43,338

40,681

40,229

Redeemable noncontrolling interest

14

14

14


Stockholders’ Equity

Total Deere & Company stockholders’ equity

12,266

11,288

10,356

5,106

5,039

4,809

Noncontrolling interests

4

3

10

Total stockholders’ equity

12,270

11,291

10,366

5,106

5,039

4,809


Total Liabilities and Stockholders’ Equity

$

34,770

$

33,197

$

32,804

$

48,444

$

45,720

$

45,038

* Deere & Company with Financial Services on the equity basis.

The supplemental consolidating data is presented for informational purposes. Transactions between the “Equipment Operations” and “Financial Services” have been eliminated to arrive at the consolidated financial statements.

 

SUPPLEMENTAL CONSOLIDATING DATA (Continued)

STATEMENT OF CASH FLOWS

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

(In millions of dollars) Unaudited

EQUIPMENT OPERATIONS*

FINANCIAL SERVICES

2019

2018

2019

2018


Cash Flows from Operating Activities

Net income

$

2,535

$

1,586

$

450

$

681

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

Provision for credit losses

1

19

57

47

Provision for depreciation and amortization

782

741

836

800

Gain on sales of businesses

(25)

Undistributed earnings of unconsolidated subsidiaries and affiliates

(62)

(235)

(1)

(1)

Provision (credit) for deferred income taxes

(123)

986

(209)

(345)

Changes in assets and liabilities:

Trade receivables and Equipment Operations’ financing receivables

(248)

(331)

Inventories

(670)

(975)

Accounts payable and accrued expenses

50

519

23

66

Accrued income taxes payable/receivable

(282)

231

535

(55)

Retirement benefits

35

(821)

5

7

Other

(59)

(86)

140

141

Net cash provided by operating activities

1,959

1,609

1,836

1,341


Cash Flows from Investing Activities

Collections of receivables (excluding trade and wholesale)

13,807

13,246

Proceeds from maturities and sales of marketable securities

9

9

63

47

Proceeds from sales of equipment on operating leases

1,171

1,116

Proceeds from sales of businesses, net of cash sold

133

Cost of receivables acquired (excluding trade and wholesale)

(14,597)

(13,830)

Acquisitions of businesses, net of cash acquired

(5,171)

Purchases of marketable securities

(3)

(107)

(101)

Purchases of property and equipment

(754)

(569)

(2)

(2)

Cost of equipment on operating leases acquired

(2,135)

(2,190)

Increase in trade and wholesale receivables

(2,551)

(2,330)

Other

(64)

42

12

(61)

Net cash used for investing activities

(812)

(5,556)

(4,339)

(4,105)


Cash Flows from Financing Activities

Increase (decrease) in total short-term borrowings

(119)

119

(217)

1,064

Change in intercompany receivables/payables

(683)

(797)

683

797

Proceeds from long-term borrowings

868

159

6,572

5,580

Payments of long-term borrowings

(194)

(118)

(4,162)

(4,254)

Proceeds from issuance of common stock

133

209

Repurchases of common stock

(880)

(454)

Dividends paid

(703)

(583)

(377)

(454)

Other

(52)

(41)

(22)

(25)

Net cash provided by (used for) financing activities

(1,630)

(1,506)

2,477

2,708


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

(16)

89

(8)

(18)


Net Decrease in Cash, Cash Equivalents, and Restricted Cash

(499)

(5,364)

(34)

(74)


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

3,202

8,174

813

1,293


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

$

2,703

$

2,810

$

779

$

1,219

* Deere & Company with Financial Services on the equity basis.

The supplemental consolidating data is presented for informational purposes. Transactions between the “Equipment Operations” and “Financial Services” have been eliminated to arrive at the consolidated financial statements.

 


Deere & Company


Other Financial Information

For the Nine Months Ended

Equipment Operations*

Agriculture and Turf

Construction and Forestry*

July 28

July 29

July 28

July 29

July 28

July 29

Dollars in millions

2019

2018

2019

2018

2019

2018


Net Sales

$

26,182

$

25,007

$

17,909

$

17,585

$

8,273

$

7,422


Net Sales – excluding Wirtgen

$

23,762

$

22,725

$

17,909

$

17,585

$

5,853

$

5,140


Average Identifiable Assets


With Inventories at LIFO

$

20,984

$

19,632

$

10,880

$

10,272

$

10,104

$

9,360


With Inventories at LIFO – excluding Wirtgen

$

14,603

$

13,605

$

10,880

$

10,272

$

3,723

$

3,333


With Inventories at Standard Cost

$

22,359

$

20,900

$

11,989

$

11,294

$

10,370

$

9,606


With Inventories at Standard Cost – excluding Wirtgen

$

15,977

$

14,872

$

11,989

$

11,294

$

3,988

$

3,578


Operating Profit

$

2,932

$

2,822

$

1,978

$

2,249

$

954

$

573


Operating Profit – excluding Wirtgen

$

2,657

$

2,785

$

1,978

$

2,249

$

679

$

536


Percent of Net Sales – excluding Wirtgen

11.2

%

12.3

%

11.0

%

12.8

%

11.6

%

10.4

%


Operating Return on Assets – excluding Wirtgen


With Inventories at LIFO – excluding Wirtgen

18.2

%

20.5

%

18.2

%

21.9

%

18.2

%

16.1

%


With Inventories at Standard Cost – excluding Wirtgen

16.6

%

18.7

%

16.5

%

19.9

%

17.0

%

15.0

%


SVA Cost of Assets – excluding Wirtgen

$

(1,437)

$

(1,339)

$

(1,078)

$

(1,016)

$

(359)

$

(323)


SVA – excluding Wirtgen

$

1,220

$

1,446

$

900

$

1,233

$

320

$

213

For the Nine Months Ended

Financial Services

July 28

July 29

Dollars in millions

2019

2018**


Net Income Attributable to Deere & Company

$

450

$

681


Net Income Attributable to Deere & Company – Tax Adjusted

$

402


Average Equity

$

5,018

$

4,808


Average Equity – Tax Adjusted

$

4,758


Return on Equity

9.0

%

14.2

%


Return on Equity – Tax Adjusted

8.4

%


Operating Profit

$

566

$

591


Average Equity

$

5,018

$

4,758


Cost of Equity

$

(478)

$

(527)


SVA

$

88

$

64

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.

 

Cision View original content:http://www.prnewswire.com/news-releases/deere-reports-third-quarter-net-income-of-899-million-300902751.html

SOURCE Deere & Company

View original content: http://www.newswire.ca/en/releases/archive/August2019/16/c8313.html

Deere Reports Third-Quarter Net Income of $899 Million

Deere Reports Third-Quarter Net Income of $899 Million

– Quarterly sales decline 3% to $8.97 billion.

– Continued uncertainty in agricultural sector weighs on results.

– Construction & Forestry reports sharply higher profit.

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

PR Newswire

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

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


Deere & Company

Third Quarter

Year to Date


$ in millions

2019

2018

% Change

2019

2018

% Change

Net income – adjusted

$

867

$

849

2%

$

2,505

$

2,325

8%

Fully diluted EPS – adjusted

$

2.71

$

2.59

$

7.79

$

7.08

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

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

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


Company Outlook & Summary

Company equipment sales are projected to increase by about 4 percent for fiscal 2019 compared with 2018. Included in the forecast are Wirtgen results for the full fiscal year of 2019 compared with 10 months of the prior year. This adds about 1 percent to the company’s net sales forecast for the current year. Also included is a negative foreign-currency translation effect of about 2 percent for the year. Net sales and revenues are projected to increase about 5 percent for fiscal 2019. Net income attributable to Deere & Company is forecast to be about $3.2 billion.

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


Deere & Company

Third Quarter

Year to Date


$ in millions

2019

2018

% Change

2019

2018

% Change

Net sales and revenues

$

10,036

$

10,308

-3%

$

29,362

$

27,942

5%

Net income

$

899

$

910

-1%

$

2,532

$

1,584

60%

Fully diluted EPS

$

2.81

$

2.78

$

7.87

$

4.82

Net income – adjusted

$

867

$

849

2%

$

2,505

$

2,325

8%

Fully diluted EPS – adjusted

$

2.71

$

2.59

$

7.79

$

7.08

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


Equipment Operations

Third Quarter

Year to Date


$ in millions

2019

2018

% Change

2019

2018

% Change

Net sales

$

8,969

$

9,286

-3%

$

26,182

$

25,007

5%

Operating profit

$

990

$

1,087

-9%

$

2,932

$

2,822

4%

Net income

$

717

$

750

-4%

$

2,067

$

889

133%

Tax reform unfavorable

(favorable) adjustments

(24)

(58)

-59%

(24)

974

-102%

Net income without tax reform

$

693

$

692

$

2,043

$

1,863

10%

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


Agriculture & Turf

Third Quarter

Year to Date


$ in millions

2019

2018

% Change

2019

2018

% Change

Net sales

$

5,946

$

6,293

-6%

$

17,909

$

17,585

2%

Operating profit

$

612

$

806

-24%

$

1,978

$

2,249

-12%

Operating margin

10.3%

12.8%

11.0%

12.8%

Agriculture & Turf sales decreased for the quarter due to lower shipment volumes and the unfavorable effects of currency translation, partially offset by price realization. Year-to-date sales increased mainly as a result of price realization and increased shipment volumes, partially offset by the unfavorable effects of currency translation. Operating profit declined for the quarter primarily due to lower shipment volumes, higher production costs, and the unfavorable effects of foreign-currency exchange, partially offset by price realization. Nine-month operating profit moved lower resulting from higher production costs, the unfavorable effects of currency translation, increased research and development costs, and a less-favorable sales mix. These factors were partially offset by price realization and higher shipment volumes. 


Construction & Forestry

Third Quarter

Year to Date


$ in millions

2019

2018

% Change

2019

2018

% Change

Net sales

$

3,023

$

2,993

1%

$

8,273

$

7,422

11%

Operating profit

$

378

$

281

35%

$

954

$

573

66%

Operating margin

12.5%

9.4%

11.5%

7.7%

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


Financial Services

Third Quarter

Year to Date


$ in millions

2019

2018

% Change

2019

2018

% Change

Net income

$

175

$

151

16%

$

450

$

681

-34%

Tax reform unfavorable (favorable) adjustments

(8)

(3)

167%

(3)

(233)

-99%

Net income without tax reform

$

167

$

148

13%

$

447

$

448

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


Market Conditions and Outlook (annual)


$ in millions

Agriculture & Turf

Net Sales

2%

Currency Translation

-2%

Construction & Forestry

Net Sales

10%

Currency Translation

-2%

John Deere Financial

Net Income

$ 620

Agriculture & Turf. Industry sales of agricultural equipment are expected to be about the same as last year for the U.S. and Canada as well as for the EU28-member nations. South American industry sales of tractors and combines are projected to be flat to up 5 percent benefiting from strength in Brazil. Asian sales are forecast to be flat to down slightly. Industry sales of turf and utility equipment in the U.S. and Canada are expected to be flat to up 5 percent for 2019.

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

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

John Deere Capital Corporation

The following is disclosed on behalf of the company’s financial services subsidiary, John Deere Capital Corporation (JDCC), in connection with the disclosure requirements applicable to its periodic issuance of debt securities in the public market.

Third Quarter

Year to Date


$ in millions

2019

2018

% Change

2019

2018

% Change

Revenue

$

742

$

661

12%

$

2,106

$

1,864

13%

Net income

$

145

$

120

21%

$

351

$

639

-45%

Ending portfolio balance

$

38,625

$

35,633

8%

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

APPENDIX

DEERE & COMPANY
SUPPLEMENTAL STATEMENT OF CONSOLIDATED INCOME INFORMATION
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(Millions, except per-share amounts)
(Unaudited)

In addition to reporting financial results in conformity with accounting principles generally accepted in the United States (GAAP), the company also discusses non-GAAP measures that exclude adjustments related to tax reform. Net income attributable to Deere & Company and diluted earnings per share measures that exclude this item are not in accordance with nor a substitute for GAAP measures. The company believes that discussion of results excluding this item provides a useful analysis of ongoing operating trends.

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

Three Months Ended

Nine Months Ended

July 28, 2019

July 28, 2019

Net Income

Net Income

Attributable to

Diluted

Attributable to

Diluted

Deere &

Earnings

Deere &

Earnings

Company

Per Share

Company

Per Share

GAAP measure

$

899

$

2.81

$

2,532

$

7.87

Discrete tax reform expense (benefit)

(32)

(.10)

(27)

(.08)

Non-GAAP measure

$

867

$

2.71

$

2,505

$

7.79

Three Months Ended

Nine Months Ended

July 29, 2018

July 29, 2018

Net Income

Net Income

Attributable to

Diluted

Attributable to

Diluted

Deere &

Earnings

Deere &

Earnings

Company

Per Share

Company

Per Share

GAAP measure

$

910

$

2.78

$

1,584

$

4.82

Discrete tax reform expense (benefit)

(61)

(.19)

741

2.26

Non-GAAP measure

$

849

$

2.59

$

2,325

$

7.08

Safe Harbor Statement

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995:  Statements under “Company Outlook & Summary,” “Market Conditions & Outlook,” and other forward-looking statements herein that relate to future events, expectations, and trends involve factors that are subject to change, and risks and uncertainties that could cause actual results to differ materially.  Some of these risks and uncertainties could affect particular lines of business, while others could affect all of the company’s businesses.

The company’s agricultural equipment business is subject to a number of uncertainties including the factors that affect farmers’ confidence and financial condition.  These factors include demand for agricultural products, world grain stocks, weather conditions, soil conditions, harvest yields, prices for commodities and livestock, crop and livestock production expenses, availability of transport for crops, trade restrictions and tariffs, global trade agreements (e.g., the North American Free Trade Agreement), the level of farm product exports (including concerns about genetically modified organisms), the growth and sustainability of non-food uses for some crops (including ethanol and biodiesel production), real estate values, available acreage for farming, the land ownership policies of governments, changes in government farm programs and policies, international reaction to such programs, changes in and effects of crop insurance programs, changes in environmental regulations and their impact on farming practices, animal diseases (e.g., African swine fever) and their effects on poultry, beef and pork consumption and prices and on livestock feed demand, and crop pests and diseases.

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

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

All of the company’s businesses and its results are affected by general economic conditions in the global markets and industries in which the company operates; customer confidence in general economic conditions; government spending and taxing; foreign currency exchange rates and their volatility, especially fluctuations in the value of the U.S. dollar; interest rates; inflation and deflation rates; changes in weather patterns; the political and social stability of the global markets in which the company operates; the effects of, or response to, terrorism and security threats; wars and other conflicts; natural disasters; and the spread of major epidemics.

Significant changes in market liquidity conditions, changes in the company’s credit ratings and any failure to comply with financial covenants in credit agreements could impact access to funding and funding costs, which could reduce the company’s earnings and cash flows.  Financial market conditions could also negatively impact customer access to capital for purchases of the company’s products and customer confidence and purchase decisions, borrowing and repayment practices, and the number and size of customer loan delinquencies and defaults.  A debt crisis, in Europe or elsewhere, could negatively impact currencies, global financial markets, social and political stability, funding sources and costs, asset and obligation values, customers, suppliers, demand for equipment, and company operations and results.  The company’s investment management activities could be impaired by changes in the equity, bond and other financial markets, which would negatively affect earnings.

The anticipated withdrawal of the United Kingdom from the European Union and the perceptions as to the impact of the withdrawal may adversely affect business activity, political stability and economic conditions in the United Kingdom, the European Union and elsewhere.  The economic conditions and outlook could be further adversely affected by (i) the uncertainty concerning the timing and terms of the exit, (ii) new or modified trading arrangements between the United Kingdom and other countries, (iii) the risk that one or more other European Union countries could come under increasing pressure to leave the European Union, or (iv) the risk that the euro as the single currency of the Eurozone could cease to exist.  Any of these developments, or the perception that any of these developments are likely to occur, could affect 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).


Third Quarter 2019 Press Release

(in millions of dollars)

Unaudited

Three Months Ended

Nine Months Ended

July 28

July 29

%

July 28

July 29

%

2019

2018

Change

2019

2018

Change

Net sales and revenues:

Agriculture and turf

$

5,946

$

6,293

-6

$

17,909

$

17,585

+2

Construction and forestry

3,023

2,993

+1

8,273

7,422

+11

Total net sales

8,969

9,286

-3

26,182

25,007

+5

Financial services

910

830

+10

2,650

2,402

+10

Other revenues

157

192

-18

530

533

-1

Total net sales and revenues

$

10,036

$

10,308

-3

$

29,362

$

27,942

+5

Operating profit: *

Agriculture and turf

$

612

$

806

-24

$

1,978

$

2,249

-12

Construction and forestry

378

281

+35

954

573

+66

Financial services

204

196

+4

566

591

-4

Total operating profit

1,194

1,283

-7

3,498

3,413

+2

Reconciling items **

(74)

(84)

-12

(218)

(305)

-29

Income taxes

(221)

(289)

-24

(748)

(1,524)

-51

Net income attributable to Deere & Company

$

899

$

910

-1

$

2,532

$

1,584

+60

*

Operating profit is income from continuing operations before corporate expenses, certain external interest expense, certain foreign exchange gains and losses, and income taxes. Operating profit of the financial services segment includes the effect of interest expense and foreign exchange gains or losses.

**

Reconciling items are primarily corporate expenses, certain external interest expense, certain foreign exchange gains and losses, pension and postretirement benefit costs excluding the service cost component, and net income attributable to noncontrolling interests.

 

DEERE & COMPANY

STATEMENT OF CONSOLIDATED INCOME

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

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

2019

2018


Net Sales and Revenues

Net sales

$

8,969

$

9,286

Finance and interest income

884

786

Other income

183

236

Total

10,036

10,308


Costs and Expenses

Cost of sales

6,870

7,152

Research and development expenses

431

416

Selling, administrative and general expenses

896

913

Interest expense

374

291

Other operating expenses

352

346

Total

8,923

9,118


Income of Consolidated Group before Income Taxes

1,113

1,190

Provision for income taxes

221

289


Income of Consolidated Group

892

901

Equity in income of unconsolidated affiliates

7

10


Net Income

899

911

Less: Net income attributable to noncontrolling interests

1


Net Income Attributable to Deere & Company

$

899

$

910


Per Share Data

Basic

$

2.84

$

2.81

Diluted

$

2.81

$

2.78


Average Shares Outstanding

Basic

315.9

323.5

Diluted

319.8

328.0

See Condensed Notes to Interim Consolidated Financial Statements.

 

DEERE & COMPANY

STATEMENT OF CONSOLIDATED INCOME

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

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

2019

2018


Net Sales and Revenues

Net sales

$

26,182

$

25,007

Finance and interest income

2,537

2,263

Other income

643

672

Total

29,362

27,942


Costs and Expenses

Cost of sales

20,056

19,190

Research and development expenses

1,295

1,188

Selling, administrative and general expenses

2,607

2,557

Interest expense

1,078

881

Other operating expenses

1,063

1,034

Total

26,099

24,850


Income of Consolidated Group before Income Taxes

3,263

3,092

Provision for income taxes

748

1,524


Income of Consolidated Group

2,515

1,568

Equity in income of unconsolidated affiliates

20

18


Net Income

2,535

1,586

Less: Net income attributable to noncontrolling interests

3

2


Net Income Attributable to Deere & Company

$

2,532

$

1,584


Per Share Data

Basic

$

7.98

$

4.90

Diluted

$

7.87

$

4.82


Average Shares Outstanding

Basic

317.3

323.4

Diluted

321.5

328.2

See Condensed Notes to Interim Consolidated Financial Statements.

 

DEERE & COMPANY

CONDENSED CONSOLIDATED BALANCE SHEET

(In millions of dollars) Unaudited

July 28

October 28

July 29

2019

2018

2018


Assets

Cash and cash equivalents

$

3,383

$

3,904

$

3,923

Marketable securities

565

490

488

Receivables from unconsolidated affiliates

54

22

28

Trade accounts and notes receivable – net

6,758

5,004

6,208

Financing receivables – net

27,049

27,054

25,213

Financing receivables securitized – net

5,200

4,022

4,662

Other receivables

1,535

1,736

1,300

Equipment on operating leases – net

7,269

7,165

6,805

Inventories

6,747

6,149

6,239

Property and equipment – net

5,798

5,868

5,638

Investments in unconsolidated affiliates

219

207

199

Goodwill

3,013

3,101

3,047

Other intangible assets – net

1,444

1,562

1,581

Retirement benefits

1,431

1,298

737

Deferred income taxes

1,088

808

1,645

Other assets

1,977

1,718

1,677


Total Assets

$

73,530

$

70,108

$

69,390


Liabilities and Stockholders’ Equity


Liabilities

Short-term borrowings

$

11,142

$

11,062

$

11,004

Short-term securitization borrowings

5,048

3,957

4,528

Payables to unconsolidated affiliates

136

129

111

Accounts payable and accrued expenses

9,390

10,111

9,483

Deferred income taxes

507

556

524

Long-term borrowings

29,242

27,237

26,838

Retirement benefits and other liabilities

5,781

5,751

6,522

Total liabilities

61,246

58,803

59,010

Redeemable noncontrolling interest

14

14

14


Stockholders’ Equity

Total Deere & Company stockholders’ equity

12,266

11,288

10,356

Noncontrolling interests

4

3

10

Total stockholders’ equity

12,270

11,291

10,366


Total Liabilities and Stockholders’ Equity

$

73,530

$

70,108

$

69,390

See Condensed Notes to Interim Consolidated Financial Statements.

 

DEERE & COMPANY

STATEMENT OF CONSOLIDATED CASH FLOWS

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

(In millions of dollars) Unaudited

2019

2018


Cash Flows from Operating Activities

Net income

$

2,535

$

1,586

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

Provision for credit losses

58

66

Provision for depreciation and amortization

1,522

1,445

Share-based compensation expense

63

63

Gain on sales of businesses

(25)

Undistributed earnings of unconsolidated affiliates

10

(10)

Provision (credit) for deferred income taxes

(332)

641

Changes in assets and liabilities:

Trade, notes, and financing receivables related to sales

(2,206)

(2,365)

Inventories

(1,168)

(1,539)

Accounts payable and accrued expenses

(306)

213

Accrued income taxes payable/receivable

253

176

Retirement benefits

40

(814)

Other

(65)

(109)

Net cash provided by (used for) operating activities

404

(672)


Cash Flows from Investing Activities

Collections of receivables (excluding receivables related to sales)

12,685

12,162

Proceeds from maturities and sales of marketable securities

72

56

Proceeds from sales of equipment on operating leases

1,171

1,116

Proceeds from sales of businesses, net of cash sold

133

Cost of receivables acquired (excluding receivables related to sales)

(13,662)

(12,586)

Acquisitions of businesses, net of cash acquired

(5,171)

Purchases of marketable securities

(110)

(101)

Purchases of property and equipment

(756)

(571)

Cost of equipment on operating leases acquired

(1,462)

(1,428)

Other

(67)

(103)

Net cash used for investing activities

(2,129)

(6,493)


Cash Flows from Financing Activities

Increase (decrease) in total short-term borrowings

(336)

1,183

Proceeds from long-term borrowings

7,440

5,739

Payments of long-term borrowings

(4,356)

(4,372)

Proceeds from issuance of common stock

133

209

Repurchases of common stock

(880)

(454)

Dividends paid

(703)

(583)

Other

(82)

(66)

Net cash provided by financing activities

1,216

1,656


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

(24)

71


Net Decrease in Cash, Cash Equivalents, and Restricted Cash

(533)

(5,438)


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

4,015

9,467


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

$

3,482

$

4,029

See Condensed Notes to Interim Consolidated Financial Statements.

 


Condensed Notes to Interim Consolidated Financial Statements (Unaudited)

(1)

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

Three Months Ended

Nine Months Ended

July 28

July 29

July 28

July 29

2019

2018

2019

2018

Dividends declared

$

.76

$

.69

$

2.28

$

1.89

Dividends paid

$

.76

$

.60

$

2.21

$

1.80

(2)

The calculation of basic net income per share is based on the average number of shares outstanding. The calculation of diluted net income per share recognizes any dilutive effect of share-based compensation.

(3)

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

(4)

The consolidated financial statements represent the consolidation of all Deere & Company’s subsidiaries. In the supplemental consolidating data in Note 5 to the financial statements, “Equipment Operations” include the Company’s agriculture and turf operations and construction and forestry operations with “Financial Services” reflected on the equity basis.

 

(5) SUPPLEMENTAL CONSOLIDATING DATA

STATEMENT OF INCOME

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

(In millions of dollars) Unaudited

EQUIPMENT OPERATIONS*

FINANCIAL SERVICES

2019

2018

2019

2018


Net Sales and Revenues

Net sales

$

8,969

$

9,286

Finance and interest income

30

31

$

952

$

852

Other income

185

231

51

67

Total

9,184

9,548

1,003

919


Costs and Expenses

Cost of sales

6,871

7,153

Research and development expenses

431

416

Selling, administrative and general expenses

751

769

147

145

Interest expense

67

52

311

250

Interest compensation to Financial Services

93

86

Other operating expenses

64

80

339

326

Total

8,277

8,556

797

721


Income of Consolidated Group before Income Taxes

907

992

206

198

Provision for income taxes

190

242

31

47


Income of Consolidated Group

717

750

175

151


Equity in Income of Unconsolidated Subsidiaries and Affiliates

Financial Services

175

151

Other

7

10

Total

182

161


Net Income

899

911

175

151

Less: Net income attributable to noncontrolling interests

1


Net Income Attributable to Deere & Company

$

899

$

910

$

175

$

151

* Deere & Company with Financial Services on the equity basis.

The supplemental consolidating data is presented for informational purposes. Transactions between the “Equipment Operations” and “Financial Services” have been eliminated to arrive at the consolidated financial statements.

 

SUPPLEMENTAL CONSOLIDATING DATA (Continued)

STATEMENT OF INCOME

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

(In millions of dollars) Unaudited

EQUIPMENT OPERATIONS*

FINANCIAL SERVICES

2019

2018

2019

2018


Net Sales and Revenues

Net sales

$

26,182

$

25,007

Finance and interest income

79

70

$

2,727

$

2,441

Other income

614

631

184

195

Total

26,875

25,708

2,911

2,636


Costs and Expenses

Cost of sales

20,058

19,192

Research and development expenses

1,295

1,188

Selling, administrative and general expenses

2,191

2,159

422

403

Interest expense

182

226

910

675

Interest compensation to Financial Services

254

228

Other operating expenses

203

219

1,008

962

Total

24,183

23,212

2,340

2,040


Income of Consolidated Group before Income Taxes

2,692

2,496

571

596

Provision (credit) for income taxes

625

1,607

123

(83)


Income of Consolidated Group

2,067

889

448

679


Equity in Income of Unconsolidated Subsidiaries and Affiliates

Financial Services

450

681

2

2

Other

18

16

Total

468

697

2

2


Net Income

2,535

1,586

450

681

Less: Net income attributable to noncontrolling interests

3

2


Net Income Attributable to Deere & Company

$

2,532

$

1,584

$

450

$

681

* Deere & Company with Financial Services on the equity basis.

The supplemental consolidating data is presented for informational purposes. Transactions between the “Equipment Operations” and “Financial Services” have been eliminated to arrive at the consolidated financial statements.

 

SUPPLEMENTAL CONSOLIDATING DATA (Continued)

CONDENSED BALANCE SHEET

(In millions of dollars) Unaudited

EQUIPMENT OPERATIONS*

FINANCIAL SERVICES

July 28

October 28

July 29

July 28

October 28

July 29

2019

2018

2018

2019

2018

2018


Assets

Cash and cash equivalents

$

2,694

$

3,195

$

2,803

$

689

$

709

$

1,120

Marketable securities

5

8

11

560

482

477

Receivables from unconsolidated subsidiaries and affiliates

2,395

1,700

1,795

Trade accounts and notes receivable – net

1,606

1,374

1,586

6,807

4,906

6,080

Financing receivables – net

100

93

78

26,949

26,961

25,135

Financing receivables securitized – net

54

76

90

5,146

3,946

4,572

Other receivables

1,428

1,010

1,131

126

776

176

Equipment on operating leases – net

7,269

7,165

6,805

Inventories

6,747

6,149

6,239

Property and equipment – net

5,753

5,821

5,592

45

47

46

Investments in unconsolidated subsidiaries and affiliates

5,309

5,231

4,992

16

15

15

Goodwill

3,013

3,101

3,047

Other intangible assets – net

1,444

1,562

1,581

Retirement benefits

1,374

1,241

727

57

57

14

Deferred income taxes

1,579

1,503

1,984

72

69

68

Other assets

1,269

1,133

1,148

708

587

530


Total Assets

$

34,770

$

33,197

$

32,804

$

48,444

$

45,720

$

45,038


Liabilities and Stockholders’ Equity


Liabilities

Short-term borrowings

$

1,372

$

1,434

$

789

$

9,770

$

9,628

$

10,215

Short-term securitization borrowings

53

75

90

4,995

3,882

4,438

Payables to unconsolidated subsidiaries and affiliates

136

129

111

2,341

1,678

1,766

Accounts payable and accrued expenses

9,422

9,383

9,047

1,641

2,056

1,902

Deferred income taxes

454

497

431

616

823

500

Long-term borrowings

5,364

4,714

5,526

23,878

22,523

21,312

Retirement benefits and other liabilities

5,685

5,660

6,430

97

91

96

Total liabilities

22,486

21,892

22,424

43,338

40,681

40,229

Redeemable noncontrolling interest

14

14

14


Stockholders’ Equity

Total Deere & Company stockholders’ equity

12,266

11,288

10,356

5,106

5,039

4,809

Noncontrolling interests

4

3

10

Total stockholders’ equity

12,270

11,291

10,366

5,106

5,039

4,809


Total Liabilities and Stockholders’ Equity

$

34,770

$

33,197

$

32,804

$

48,444

$

45,720

$

45,038

* Deere & Company with Financial Services on the equity basis.

The supplemental consolidating data is presented for informational purposes. Transactions between the “Equipment Operations” and “Financial Services” have been eliminated to arrive at the consolidated financial statements.

 

SUPPLEMENTAL CONSOLIDATING DATA (Continued)

STATEMENT OF CASH FLOWS

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

(In millions of dollars) Unaudited

EQUIPMENT OPERATIONS*

FINANCIAL SERVICES

2019

2018

2019

2018


Cash Flows from Operating Activities

Net income

$

2,535

$

1,586

$

450

$

681

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

Provision for credit losses

1

19

57

47

Provision for depreciation and amortization

782

741

836

800

Gain on sales of businesses

(25)

Undistributed earnings of unconsolidated subsidiaries and affiliates

(62)

(235)

(1)

(1)

Provision (credit) for deferred income taxes

(123)

986

(209)

(345)

Changes in assets and liabilities:

Trade receivables and Equipment Operations’ financing receivables

(248)

(331)

Inventories

(670)

(975)

Accounts payable and accrued expenses

50

519

23

66

Accrued income taxes payable/receivable

(282)

231

535

(55)

Retirement benefits

35

(821)

5

7

Other

(59)

(86)

140

141

Net cash provided by operating activities

1,959

1,609

1,836

1,341


Cash Flows from Investing Activities

Collections of receivables (excluding trade and wholesale)

13,807

13,246

Proceeds from maturities and sales of marketable securities

9

9

63

47

Proceeds from sales of equipment on operating leases

1,171

1,116

Proceeds from sales of businesses, net of cash sold

133

Cost of receivables acquired (excluding trade and wholesale)

(14,597)

(13,830)

Acquisitions of businesses, net of cash acquired

(5,171)

Purchases of marketable securities

(3)

(107)

(101)

Purchases of property and equipment

(754)

(569)

(2)

(2)

Cost of equipment on operating leases acquired

(2,135)

(2,190)

Increase in trade and wholesale receivables

(2,551)

(2,330)

Other

(64)

42

12

(61)

Net cash used for investing activities

(812)

(5,556)

(4,339)

(4,105)


Cash Flows from Financing Activities

Increase (decrease) in total short-term borrowings

(119)

119

(217)

1,064

Change in intercompany receivables/payables

(683)

(797)

683

797

Proceeds from long-term borrowings

868

159

6,572

5,580

Payments of long-term borrowings

(194)

(118)

(4,162)

(4,254)

Proceeds from issuance of common stock

133

209

Repurchases of common stock

(880)

(454)

Dividends paid

(703)

(583)

(377)

(454)

Other

(52)

(41)

(22)

(25)

Net cash provided by (used for) financing activities

(1,630)

(1,506)

2,477

2,708


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

(16)

89

(8)

(18)


Net Decrease in Cash, Cash Equivalents, and Restricted Cash

(499)

(5,364)

(34)

(74)


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

3,202

8,174

813

1,293


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

$

2,703

$

2,810

$

779

$

1,219

* Deere & Company with Financial Services on the equity basis.

The supplemental consolidating data is presented for informational purposes. Transactions between the “Equipment Operations” and “Financial Services” have been eliminated to arrive at the consolidated financial statements.

 


Deere & Company


Other Financial Information

For the Nine Months Ended

Equipment Operations*

Agriculture and Turf

Construction and Forestry*

July 28

July 29

July 28

July 29

July 28

July 29

Dollars in millions

2019

2018

2019

2018

2019

2018


Net Sales

$

26,182

$

25,007

$

17,909

$

17,585

$

8,273

$

7,422


Net Sales – excluding Wirtgen

$

23,762

$

22,725

$

17,909

$

17,585

$

5,853

$

5,140


Average Identifiable Assets


With Inventories at LIFO

$

20,984

$

19,632

$

10,880

$

10,272

$

10,104

$

9,360


With Inventories at LIFO – excluding Wirtgen

$

14,603

$

13,605

$

10,880

$

10,272

$

3,723

$

3,333


With Inventories at Standard Cost

$

22,359

$

20,900

$

11,989

$

11,294

$

10,370

$

9,606


With Inventories at Standard Cost – excluding Wirtgen

$

15,977

$

14,872

$

11,989

$

11,294

$

3,988

$

3,578


Operating Profit

$

2,932

$

2,822

$

1,978

$

2,249

$

954

$

573


Operating Profit – excluding Wirtgen

$

2,657

$

2,785

$

1,978

$

2,249

$

679

$

536


Percent of Net Sales – excluding Wirtgen

11.2

%

12.3

%

11.0

%

12.8

%

11.6

%

10.4

%


Operating Return on Assets – excluding Wirtgen


With Inventories at LIFO – excluding Wirtgen

18.2

%

20.5

%

18.2

%

21.9

%

18.2

%

16.1

%


With Inventories at Standard Cost – excluding Wirtgen

16.6

%

18.7

%

16.5

%

19.9

%

17.0

%

15.0

%


SVA Cost of Assets – excluding Wirtgen

$

(1,437)

$

(1,339)

$

(1,078)

$

(1,016)

$

(359)

$

(323)


SVA – excluding Wirtgen

$

1,220

$

1,446

$

900

$

1,233

$

320

$

213

For the Nine Months Ended

Financial Services

July 28

July 29

Dollars in millions

2019

2018**


Net Income Attributable to Deere & Company

$

450

$

681


Net Income Attributable to Deere & Company – Tax Adjusted

$

402


Average Equity

$

5,018

$

4,808


Average Equity – Tax Adjusted

$

4,758


Return on Equity

9.0

%

14.2

%


Return on Equity – Tax Adjusted

8.4

%


Operating Profit

$

566

$

591


Average Equity

$

5,018

$

4,758


Cost of Equity

$

(478)

$

(527)


SVA

$

88

$

64

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.

 

Cision View original content:http://www.prnewswire.com/news-releases/deere-reports-third-quarter-net-income-of-899-million-300902751.html

SOURCE Deere & Company

Xinyuan Real Estate Co., Ltd. Announces Second Quarter 2019 Financial Results

Xinyuan Real Estate Co., Ltd. Announces Second Quarter 2019 Financial Results

PR Newswire

BEIJING, Aug. 16, 2019 /PRNewswire/ – Xinyuan Real Estate Co., Ltd. (“Xinyuan” or the “Company”) (NYSE: XIN), an NYSE-listed real estate developer and property manager operating primarily in China and in other countries, today announced its unaudited financial results for the second quarter ended June 30, 2019.


Highlights

  • First half contract sales of 2019 increased 3.4% to RMB6,676.3 million from RMB6,457.0 million in the first half of 2018.
  • Contract sales decreased 20.0% to US$507.4 million from US$633.9 million in the second quarter of 2018 and increased 5.8% from US$479.7 million in the first quarter of 2019.
  • Total revenue increased 71.3% to US$609.4 million from US$355.8 million in the second quarter of 2018 and increased 30.0% from US$468.9 million in the first quarter of 2019.
  • Gross profit increased 45.5% to US$159.2 million from US$109.4 million in the second quarter of 2018 and increased 21.5% from US$131.0 million in the first quarter of 2019.
  • Selling, General and Administrative (“SG&A”) expenses as a percentage of total revenue decreased to 10.3% from 13.2% in the second quarter of 2018 and decreased from 12.0% in the first quarter of 2019.
  • Net income was US$19.8 million compared to net loss of US$9.3 million in the second quarter of 2018 and net income of US$18.2 million in the first quarter of 2019.
  • Current debt outstanding decreased 33.8% to US$1,207.2 million, or 33.6% of the total debt, from US$1,823.7 million, or 51.9% of the total debt, in the first quarter of 2019.
  • Diluted net earnings per American Depositary Share (“ADS”) attributable to shareholders were US$0.19 compared to diluted net loss of US$0.10 per ADS in the second quarter of 2018 and diluted net earnings of US$0.33 per ADS in the first quarter of 2019.

Mr. Yong Zhang, Xinyuan’s Chairman, stated, “In the first half of 2019, Xinyuan maintained stable growth and commenced pre-sales of three new projects in China. The total value of contracts signed in the first half was RMB7,323.2 million, representing a 12.0% increase compared to RMB6,537.4 million in the first half of 2018. Thanks to the outstanding sales performance, the company has achieved top- and bottom-line growth despite downward pressure on sales across the industry. In the first half of 2019, total revenue increased 103.5% year over year. Moreover, we were able to reduce SG&A expenses as a percentage of total revenue to 11.0% in the first half from 16.4% in the first half of 2018. As a result, gross profit increased by 96.0% year over year, and net income was US$38.0 million compared to a net loss of US$22.0 million in the first half of 2018. Furthermore, our overseas projects continued to proceed as planned, and presales of our Manhattan project are expected to launch at the end of the fourth quarter of 2019.

“At the same time, we are seeing a lasting impact from changes in the macro-economic environment and stringent government restriction policies on the Chinese housing market. However, we believe that our strategic focus on high quality tier-one and tier-two city projects as well as our strong execution capabilities enable us to further solidify our leading market position and deliver sustainable long-term growth. We remain committed to controlling our financial leverage and maximizing Xinyuan’s financial health. We are also pleased to offer another quarterly dividend payment to our shareholders,” concluded Mr. Zhang.


Second Quarter


 2019 Financial Results

Contract Sales
Contract sales in China totaled US$507.4 million in the second quarter compared to US$630.3 million in the second quarter of 2018 and US$478.9 million in the first quarter of 2019.

The Company’s GFA sales in China were 233,200 square meters in the second quarter of 2019 compared to 282,900 square meters in the second quarter of 2018 and 211,400 square meters in the first quarter of 2019.            

The average selling price (“ASP”) per square meter sold in China was RMB14,755 (US$2,176) in the second quarter of 2019 compared to RMB14,173 (US$2,226) in the second quarter of 2018 and RMB15,269 (US$2,264) in the first quarter of 2019.

The Company commenced pre-sales of two new projects in the second quarter of 2019, Xinyang Splendid V, Suzhou Gusu Shade II. The presales contributed 5.9% and 3.6% of total GFA sales and total contract sales, respectively.

Breakdown of GFA Sales and ASPs by Project in China


Project


Q2 2018


Q1 2019


Q2 2019


GFA


ASP


GFA


ASP


GFA


ASP


(m2, 000s)


(RMB)


(m2, 000s)


(RMB)


(m2, 000s)


(RMB)

Xingyang Splendid II

0.3

9,939

10.2

7,478

3.6

7,330

Jinan Royal Palace

27.4

16,341

1.6

15,661

2.8

14,739

Xuzhou Colorful City

0.8

10,495

0.7

14,541

Chengdu Thriving Family

1.3

16,011

(0.1)

7,729

Changsha Xinyuan Splendid

3.7

15,869

0.1

18,658

Sanya Yazhou Bay No.1

12.0

25,758

0.4

25,615

0.3

38,158

Xi’an Metropolitan

4.5

7,480

0.6

11,253

0.1

12,896

Zhengzhou Xindo Park

0.4

7,560

0.7

8,661

Jinan Xin Central

9.2

14,073

0.1

13,170

0.1

18,954

Henan Xin Central I

1.0

15,342

0.1

14,887

0.7

7,942

Zhengzhou Fancy City I

1.2

10,989

(1.4)

15,073

0.5

13,714

Zhengzhou Fancy City II (South)

0.8

14,103

(0.1)

12,660

(0.1)

9,469

Tianjin Spring Royal Palace I

0.1

16,294

Zhengzhou International New City I

6.0

25,102

Henan Xin Central II

6.2

12,351

0.1

15,932

Xingyang Splendid III

13.2

7,934

0.4

7,046

0.3

8,091

Zhengzhou International New City II

1.7

13,671

0.5

18,997

Zhengzhou Fancy City II (North)

35.3

9,801

3.5

9,838

2.8

9,884

Tianjin Spring Royal Palace II

11.5

14,124

8.1

12,670

10.8

13,496

Zhengzhou International New City III D

29.6

14,282

(0.1)

14,461

0.6

14,045

Zhengzhou Hangmei International Wisdom
City I

16.2

7,195

2.3

7,144

1.8

6,845

Zhengzhou International New City III B

51.3

13,996

0.8

13,262

0.7

15,174

Chengdu Xinyuan City

33.1

9,511

2.7

7,585

Kunshan Xinyu Jiayuan

5.5

24,208

13.0

23,660

Xingyang Splendid IV

1.0

7,027

0.3

7,326

Suzhou Suhe Bay *

30.0

21,680

8.5

21,461

Zhengzhou Hangmei International Wisdom
City II

0.5

7,350

9.3

7,394

Qingdao Royal Dragon Bay

15.3

20,285

28.8

19,797

Jinan Royal Spring Bay

2.7

9,201

4.0

8,777

Xinyuan Golden Water View City-Zhengzhou

19.0

18,817

8.3

19,740

Zhengzhou Fancy City III

20.5

12,637

8.5

12,729

Zhengzhou International New City III C

17.3

12,260

15.7

12,459

Zhengzhou International New City IV A12

24.8

14,254

34.8

14,224

Zhengzhou International New City IV B10

7.9

13,969

15.5

10,698

Suzhou Galaxy Bay

2.4

13,790

34.6

14,227

Suzhou Gusu Shade I

0.8

36,262

5.6

37,678

Dalian International Health Technology
Town I

0.1

13,618

0.4

10,421

Xingyang Splendid V

13.1

7,629

Suzhou Gusu Shade II **

0.6

38,893

Others

49.2

4.1

2.4