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EX-32 - EX-32 - DEERE & COde-20160131xex32.htm
EX-31.2 - EX-31.2 - DEERE & COde-20160131ex3128194eb.htm
EX-31.1 - EX-31.1 - DEERE & COde-20160131ex3114a2ec5.htm
EX-10.1 - EX-10.1 - DEERE & COde-20160131ex101ad8d98.htm
EX-10.2 - EX-10.2 - DEERE & COde-20160131ex10262d93e.htm
EX-12 - EX-12 - DEERE & COde-20160131ex12664cf8a.htm

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C.  20549


FORM 10-Q


 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended January 31, 2016

 

Commission file no: 1-4121


 

DEERE  &  COMPANY

(Exact name of registrant as specified in its charter)

 

 

 

Delaware
(State of incorporation)

 

36-2382580
(IRS employer identification no.)

 

One John Deere Place

Moline, Illinois 61265

(Address of principal executive offices)

Telephone Number:  (309) 765-8000

 


Indicate by check mark whether the registrant:   (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes   X    No         

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes   X    No         

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.  (Check one):

 

 

 

 

 

Large accelerated filer

   X   

Accelerated filer

         

Non-accelerated filer

         

Smaller reporting company

         

(Do not check if a smaller reporting company)

 

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes          No   X   

 

At January 31, 2016, 315,325,774 shares of common stock, $1 par value, of the registrant were outstanding.

 

 

 

Index to Exhibits: Page 42

 


 

PART I.  FINANCIAL INFORMATION

 

 

 

 

 

 

 

 

ITEM 1.  FINANCIAL STATEMENTS

 

 

 

 

 

 

 

DEERE & COMPANY

 

 

 

 

 

 

 

STATEMENT OF CONSOLIDATED INCOME

 

 

 

 

 

 

 

For the Three Months Ended January 31, 2016 and 2015

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

2016

 

2015

 

Net Sales and Revenues

 

 

 

 

 

 

 

Net sales

 

$

4,769.2

 

$

5,605.1

 

Finance and interest income

 

 

599.0

 

 

593.6

 

Other income

 

 

156.3

 

 

184.4

 

Total

 

 

5,524.5

 

 

6,383.1

 

 

 

 

 

 

 

 

 

Costs and Expenses

 

 

 

 

 

 

 

Cost of sales

 

 

3,840.1

 

 

4,420.6

 

Research and development expenses

 

 

319.3

 

 

333.2

 

Selling, administrative and general expenses

 

 

592.9

 

 

659.0

 

Interest expense

 

 

173.2

 

 

180.1

 

Other operating expenses

 

 

247.8

 

 

222.6

 

Total

 

 

5,173.3

 

 

5,815.5

 

 

 

 

 

 

 

 

 

Income of Consolidated Group before Income Taxes

 

 

351.2

 

 

567.6

 

Provision for income taxes

 

 

95.5

 

 

170.5

 

Income of Consolidated Group

 

 

255.7

 

 

397.1

 

Equity in loss of unconsolidated affiliates

 

 

(1.9)

 

 

(10.2)

 

Net Income

 

 

253.8

 

 

386.9

 

Less:  Net income (loss) attributable to noncontrolling interests

 

 

(.6)

 

 

.1

 

Net Income Attributable to Deere & Company

 

$

254.4

 

$

386.8

 

 

 

 

 

 

 

 

 

Per Share Data

 

 

 

 

 

 

 

Basic

 

$

.80

 

$

1.13

 

Diluted

 

$

.80

 

$

1.12

 

 

 

 

 

 

 

 

 

Average Shares Outstanding

 

 

 

 

 

 

 

Basic

 

 

316.4

 

 

343.1

 

Diluted

 

 

317.6

 

 

345.7

 

 

 

 

 

 

 

 

 

 

See Condensed Notes to Interim Consolidated Financial Statements.

2


 

 

 

 

 

 

 

 

 

 

DEERE & COMPANY

 

 

 

 

 

 

 

STATEMENT OF CONSOLIDATED COMPREHENSIVE INCOME

 

 

 

 

 

 

 

For the Three Months Ended January 31, 2016 and 2015

 

 

 

 

 

 

 

(In millions of dollars) Unaudited

 

 

 

 

 

 

 

 

    

2016

    

2015

 

 

 

 

 

 

 

 

 

Net Income

 

$

253.8

 

$

386.9

 

 

 

 

 

 

 

 

 

Other Comprehensive Income (Loss), Net of Income Taxes

 

 

 

 

 

 

 

Retirement benefits adjustment

 

 

38.1

 

 

42.3

 

Cumulative translation adjustment

 

 

(158.0)

 

 

(510.4)

 

Unrealized loss on derivatives 

 

 

 

 

 

(1.5)

 

Unrealized gain (loss) on investments

 

 

(10.8)

 

 

7.3

 

Other Comprehensive Income (Loss), Net of Income Taxes

 

 

(130.7)

 

 

(462.3)

 

 

 

 

 

 

 

 

 

Comprehensive Income (Loss) of Consolidated Group

 

 

123.1

 

 

(75.4)

 

Less:  Comprehensive loss attributable to noncontrolling interests

 

 

(.6)

 

 

(.2)

 

Comprehensive Income (Loss) Attributable to Deere & Company

 

$

123.7

 

$

(75.2)

 

 

 

 

 

 

 

 

 

 

See Condensed Notes to Interim Consolidated Financial Statements.

3


 

 

 

 

 

 

 

 

 

 

 

 

 

DEERE & COMPANY

 

 

 

 

 

 

 

 

 

 

CONDENSED CONSOLIDATED BALANCE SHEET

 

 

 

 

 

 

 

 

 

 

(In millions of dollars) Unaudited

 

 

 

 

 

 

 

 

 

 

 

    

January 31

    

October 31

    

January 31

 

 

 

2016

 

2015

 

2015

 

Assets

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

3,459.9

 

$

4,162.2

 

$

3,974.8

 

Marketable securities

 

 

476.3

 

 

437.4

 

 

493.8

 

Receivables from unconsolidated affiliates

 

 

22.9

 

 

33.3

 

 

27.4

 

Trade accounts and notes receivable - net

 

 

3,406.8

 

 

3,051.1

 

 

3,334.6

 

Financing receivables - net

 

 

23,630.4

 

 

24,809.0

 

 

25,805.9

 

Financing receivables securitized - net

 

 

4,003.2

 

 

4,834.6

 

 

3,893.3

 

Other receivables

 

 

1,094.0

 

 

991.2

 

 

921.1

 

Equipment on operating leases - net

 

 

5,074.4

 

 

4,970.4

 

 

3,834.6

 

Inventories

 

 

4,249.5

 

 

3,817.0

 

 

4,527.1

 

Property and equipment - net

 

 

5,039.2

 

 

5,181.5

 

 

5,347.5

 

Investments in unconsolidated affiliates

 

 

299.5

 

 

303.5

 

 

301.6

 

Goodwill

 

 

718.7

 

 

726.0

 

 

741.3

 

Other intangible assets - net

 

 

59.6

 

 

63.6

 

 

62.3

 

Retirement benefits

 

 

253.7

 

 

215.6

 

 

283.5

 

Deferred income taxes

 

 

2,516.6

 

 

2,767.3

 

 

2,584.1

 

Other assets

 

 

1,731.5

 

 

1,583.9

 

 

1,772.3

 

Assets held for sale

 

 

 

 

 

 

 

 

384.9

 

Total Assets

 

$

56,036.2

 

$

57,947.6

 

$

58,290.1

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

 

 

 

Short-term borrowings

 

$

7,826.1

 

$

8,426.6

 

$

8,622.7

 

Short-term securitization borrowings

 

 

3,878.9

 

 

4,590.0

 

 

3,887.9

 

Payables to unconsolidated affiliates

 

 

79.6

 

 

80.6

 

 

119.2

 

Accounts payable and accrued expenses

 

 

6,196.4

 

 

7,311.5

 

 

6,421.9

 

Deferred income taxes

 

 

149.6

 

 

160.8

 

 

146.7

 

Long-term borrowings

 

 

24,533.2

 

 

23,832.8

 

 

24,106.7

 

Retirement benefits and other liabilities

 

 

6,768.6

 

 

6,787.7

 

 

6,469.4

 

Liabilities held for sale

 

 

 

 

 

 

 

 

266.8

 

Total liabilities

 

 

49,432.4

 

 

51,190.0

 

 

50,041.3

 

 

 

 

 

 

 

 

 

 

 

 

Commitments and contingencies (Note 14)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock, $1 par value (issued shares at
January 31, 2016 – 536,431,204)

 

 

3,843.1

 

 

3,825.6

 

 

3,714.0

 

Common stock in treasury

 

 

(15,601.9)

 

 

(15,497.6)

 

 

(13,408.2)

 

Retained earnings

 

 

23,209.1

 

 

23,144.8

 

 

22,185.2

 

Accumulated other comprehensive income (loss)

 

 

(4,860.1)

 

 

(4,729.4)

 

 

(4,245.0)

 

Total Deere & Company stockholders’ equity

 

 

6,590.2

 

 

6,743.4

 

 

8,246.0

 

Noncontrolling interests

 

 

13.6

 

 

14.2

 

 

2.8

 

Total stockholders’ equity

 

 

6,603.8

 

 

6,757.6

 

 

8,248.8

 

Total Liabilities and Stockholders’ Equity

 

$

56,036.2

 

$

57,947.6

 

$

58,290.1

 

 

 

 

 

 

 

 

 

 

 

 

 

See Condensed Notes to Interim Consolidated Financial Statements.

4


 

 

 

 

 

 

 

 

 

 

DEERE & COMPANY

 

 

 

 

 

 

 

STATEMENT OF CONSOLIDATED CASH FLOWS

 

 

 

 

 

 

 

For the Three Months Ended January 31, 2016 and 2015

 

 

 

 

 

 

 

(In millions of dollars) Unaudited

 

 

 

 

 

 

 

 

    

2016

    

2015

 

Cash Flows from Operating Activities

 

 

 

 

 

 

 

Net income

 

$

253.8

 

$

386.9

 

Adjustments to reconcile net income to net cash used for operating activities:

 

 

 

 

 

 

 

Provision for credit losses

 

 

9.4

 

 

1.0

 

Provision for depreciation and amortization

 

 

374.2

 

 

342.9

 

Impairment charges

 

 

12.6

 

 

 

 

Share-based compensation expense

 

 

17.5

 

 

18.1

 

Undistributed earnings of unconsolidated affiliates

 

 

(.6)

 

 

10.1

 

Provision for deferred income taxes

 

 

240.4

 

 

176.1

 

Changes in assets and liabilities:

 

 

 

 

 

 

 

Trade, notes and financing receivables related to sales

 

 

44.9

 

 

349.1

 

Insurance receivables

 

 

 

 

 

256.5

 

Inventories

 

 

(565.3)

 

 

(603.9)

 

Accounts payable and accrued expenses

 

 

(869.5)

 

 

(1,442.5)

 

Accrued income taxes payable/receivable

 

 

(241.5)

 

 

(185.5)

 

Retirement benefits

 

 

22.8

 

 

84.4

 

Other

 

 

(76.3)

 

 

96.7

 

Net cash used for operating activities

 

 

(777.6)

 

 

(510.1)

 

 

 

 

 

 

 

 

 

Cash Flows from Investing Activities

 

 

 

 

 

 

 

Collections of receivables (excluding receivables related to sales)

 

 

4,633.4

 

 

4,694.6

 

Proceeds from maturities and sales of marketable securities

 

 

18.7

 

 

673.4

 

Proceeds from sales of equipment on operating leases

 

 

290.8

 

 

242.1

 

Cost of receivables acquired (excluding receivables related to sales)

 

 

(3,316.6)

 

 

(3,674.8)

 

Purchases of marketable securities

 

 

(71.7)

 

 

(19.3)

 

Purchases of property and equipment

 

 

(140.0)

 

 

(184.0)

 

Cost of equipment on operating leases acquired

 

 

(570.4)

 

 

(299.7)

 

Other

 

 

7.4

 

 

(47.2)

 

Net cash provided by investing activities

 

 

851.6

 

 

1,385.1

 

 

 

 

 

 

 

 

 

Cash Flows from Financing Activities

 

 

 

 

 

 

 

Increase (decrease) in total short-term borrowings

 

 

(1,074.9)

 

 

209.8

 

Proceeds from long-term borrowings

 

 

1,832.0

 

 

1,227.8

 

Payments of long-term borrowings

 

 

(1,181.3)

 

 

(1,234.3)

 

Proceeds from issuance of common stock

 

 

2.7

 

 

44.7

 

Repurchases of common stock

 

 

(107.8)

 

 

(604.7)

 

Dividends paid

 

 

(193.1)

 

 

(209.9)

 

Excess tax benefits from share-based compensation

 

 

1.0

 

 

6.3

 

Other

 

 

(21.5)

 

 

(22.2)

 

Net cash used for financing activities

 

 

(742.9)

 

 

(582.5)

 

 

 

 

 

 

 

 

 

Effect of Exchange Rate Changes on Cash and Cash Equivalents

 

 

(33.4)

 

 

(104.7)

 

 

 

 

 

 

 

 

 

Net Increase (Decrease) in Cash and Cash Equivalents

 

 

(702.3)

 

 

187.8

 

Cash and Cash Equivalents at Beginning of Period

 

 

4,162.2

 

 

3,787.0

 

Cash and Cash Equivalents at End of Period

 

$

3,459.9

 

$

3,974.8

 

 

 

 

 

 

 

 

 

 

See Condensed Notes to Interim Consolidated Financial Statements.

5


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

DEERE & COMPANY

STATEMENT OF CHANGES IN CONSOLIDATED STOCKHOLDERS’ EQUITY

For the Three Months Ended January 31, 2015 and 2016

(In millions of dollars) Unaudited

 

 

 

 

 

Deere & Company Stockholders

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

Total

 

 

 

 

 

 

 

Other

 

Non-

 

 

 

Stockholders’

 

Common

 

Treasury

 

Retained

 

Comprehensive

 

controlling

 

 

 

Equity

 

Stock

 

Stock

 

Earnings

 

Income (Loss)

 

Interests

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance October 31, 2014

    

$

9,065.5

 

$

3,675.4

 

$

(12,834.2)

 

$

22,004.4

 

$

(3,783.0)

 

$

2.9

 

Net income

 

 

386.9

 

 

 

 

 

 

 

 

386.8

 

 

 

 

 

.1

 

Other comprehensive loss

 

 

(462.3)

 

 

 

 

 

 

 

 

 

 

 

(462.0)

 

 

(.3)

 

Repurchases of common stock

 

 

(604.7)

 

 

 

 

 

(604.7)

 

 

 

 

 

 

 

 

 

 

Treasury shares reissued

 

 

30.7

 

 

 

 

 

30.7

 

 

 

 

 

 

 

 

 

 

Dividends declared

 

 

(205.9)

 

 

 

 

 

 

 

 

(205.9)

 

 

 

 

 

 

 

Stock options and other

 

 

38.6

 

 

38.6

 

 

 

 

 

(.1)

 

 

 

 

 

.1

 

Balance January 31, 2015

 

$

8,248.8

 

$

3,714.0

 

$

(13,408.2)

 

$

22,185.2

 

$

(4,245.0)

 

$

2.8

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance October 31, 2015

 

$

6,757.6

 

$

3,825.6

 

$

(15,497.6)

 

$

23,144.8

 

$

(4,729.4)

 

$

14.2

 

Net income

 

 

253.8

 

 

 

 

 

 

 

 

254.4

 

 

 

 

 

(.6)

 

Other comprehensive loss

 

 

(130.7)

 

 

 

 

 

 

 

 

 

 

 

(130.7)

 

 

 

 

Repurchases of common stock

 

 

(107.8)

 

 

 

 

 

(107.8)

 

 

 

 

 

 

 

 

 

 

Treasury shares reissued

 

 

3.5

 

 

 

 

 

3.5

 

 

 

 

 

 

 

 

 

 

Dividends declared

 

 

(190.1)

 

 

 

 

 

 

 

 

(190.1)

 

 

 

 

 

 

 

Stock options and other

 

 

17.5

 

 

17.5

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance January 31, 2016

 

$

6,603.8

 

$

3,843.1

 

$

(15,601.9)

 

$

23,209.1

 

$

(4,860.1)

 

$

13.6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See Condensed Notes to Interim Consolidated Financial Statements.

6


 

Condensed Notes to Interim Consolidated Financial Statements (Unaudited)

(1)The information in the notes and related commentary are presented in a format which includes data grouped as follows:

Equipment Operations - Includes the Company’s agriculture and turf operations and construction and forestry operations with financial services reflected on the equity basis.

Financial Services - Includes primarily the Company’s financing operations.

Consolidated - Represents the consolidation of the equipment operations and financial services.  References to "Deere & Company" or "the Company" refer to the entire enterprise.

The Company uses a 52/53 week fiscal year with quarters ending on the last Sunday in the reporting period.  The first quarter ends for fiscal year 2016 and 2015 were January 31, 2016 and February 1, 2015, respectively.  Both periods contained 13 weeks.  For ease of presentation, the consolidated financial statements and notes continue to be dated January 31.

 

(2)The interim consolidated financial statements of Deere & Company and consolidated subsidiaries have been prepared by the Company, without audit, pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (SEC).  Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the U.S. have been condensed or omitted as permitted by such rules and regulations.  All adjustments, consisting of normal recurring adjustments, have been included.  Management believes that the disclosures are adequate to present fairly the financial position, results of operations and cash flows at the dates and for the periods presented.  It is suggested that these interim consolidated financial statements be read in conjunction with the consolidated financial statements and the notes thereto appearing in the Company’s latest annual report on Form 10-K.  Results for interim periods are not necessarily indicative of those to be expected for the fiscal year.

The preparation of financial statements in conformity with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions that affect the reported amounts and related disclosures.  Actual results could differ from those estimates.

Cash Flow Information

All cash flows from the changes in trade accounts and notes receivable are classified as operating activities in the Statement of Consolidated Cash Flows as these receivables arise from sales to the Company’s customers.  Cash flows from financing receivables that are related to sales to the Company’s customers are also included in operating activities.  The remaining financing receivables are related to the financing of equipment sold by independent dealers and are included in investing activities.

The Company had the following non-cash operating and investing activities that were not included in the Statement of Consolidated Cash Flows.  The Company transferred inventory to equipment on operating leases of approximately $115 million and $96 million in the first three months of 2016 and 2015, respectively.  The Company also had accounts payable related to purchases of property and equipment of approximately $25 million and $43 million at January 31, 2016 and 2015, respectively.

 

(3)New accounting standards to be adopted are as follows:

In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers (Topic 606), which supersedes the revenue recognition requirements in Accounting Standards Codification (ASC) 605, Revenue Recognition.  This ASU is based on the principle that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.  The ASU also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract.  In August 2015, the FASB issued ASU No. 2015-14, Deferral of the Effective Date, which amends ASU No. 2014-09.  As a result, the effective date will be the first quarter of fiscal year 2019 with early adoption permitted in the first quarter of fiscal year 2018.  The adoption will use one of two retrospective application methods.  The Company has not determined the potential effects on the consolidated financial statements.

7


 

In June 2014, the FASB issued ASU No. 2014-12, Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period, which amends ASC 718, Compensation - Stock Compensation.  This ASU requires that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition.  Therefore, the performance target should not be reflected in estimating the grant-date fair value of the award.  Compensation cost should be recognized in the period in which it becomes probable that the performance target will be achieved and should represent the compensation cost attributable to the period(s) for which the requisite service has already been rendered.  The total compensation cost recognized during and after the requisite service period should reflect the number of awards that are expected to vest and should be adjusted to reflect those awards that ultimately vest.  The effective date will be the first quarter of fiscal year 2017.  The adoption will not have a material effect on the Company’s consolidated financial statements.

In April 2015, the FASB issued ASU No. 2015-03, Simplifying the Presentation of Debt Issuance Costs, which amends ASC 835-30, Interest - Imputation of Interest.  This ASU requires that debt issuance costs related to borrowings be presented in the balance sheet as a direct deduction from the carrying amount of the borrowing.  This treatment is consistent with debt discounts.  The ASU does not affect the amount or timing of expenses for debt issuance costs.  The effective date will be the first quarter of fiscal year 2017 and will be applied retrospectively.  The adoption will not have a material effect on the Company’s consolidated financial statements.

In April 2015, the FASB issued ASU No. 2015-05, Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement, which amends ASC 350-40, Intangibles-Goodwill and Other-Internal-Use Software.  This ASU provides guidance to customers about whether a cloud computing arrangement includes a software license.  If an arrangement includes a software license, the accounting for the license will be consistent with licenses of other intangible assets.  If the arrangement does not include a license, the arrangement will be accounted for as a service contract.  The effective date will be the first quarter of fiscal year 2017 and will be adopted prospectively.  The adoption will not have a material effect on the Company’s consolidated financial statements.

In May 2015, the FASB issued ASU No. 2015-09, Disclosures about Short-Duration Contracts, which amends ASC 944, Financial Services - Insurance.  This ASU requires disclosure of additional information about unpaid claims and claims adjustment expenses, including a rollforward of the liability of the claims adjustment liability.  The effective date will be the fourth quarter of fiscal year 2017.  The adoption will not have a material effect on the Company’s consolidated financial statements.

In July 2015, the FASB issued ASU No. 2015-11, Simplifying the Measurement of Inventory, which amends ASC 330, Inventory.  This ASU simplifies the subsequent measurement of inventory by using only the lower of cost or net realizable value.  The ASU does not apply to inventory measured using last-in, first-out method.  The effective date will be the first quarter of fiscal year 2018 with early adoption permitted.  The adoption will not have a material effect on the Company’s consolidated financial statements.

In August 2015, the FASB issued ASU No. 2015-15, Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements, which amends ASC 835-30, Interest - Imputation of Interest.  This ASU clarifies the presentation and subsequent measurement of debt issuance costs associated with lines of credit.  These costs may be presented as an asset and amortized ratably over the term of the line of credit arrangement, regardless of whether there are outstanding borrowings on the arrangement.  The effective date will be the first quarter of fiscal year 2017 and will be applied retrospectively.  The adoption will not have a material effect on the Company’s consolidated financial statements.

In January 2016, the FASB issued ASU No. 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities, which amends ASC 825-10, Financial Instruments - Overall.  This ASU changes the treatment for available for sale equity investments by recognizing unrealized fair value changes directly in net income, and no longer in other comprehensive income.  In addition, the impairment assessment of equity securities without readily determinable fair values is simplified by allowing a qualitative assessment.  The ASU eliminates the disclosure requirement of methods and assumptions used to estimate fair value for financial instruments measured at amortized cost on the balance sheet.  Additional disclosure of financial assets and financial liabilities by measurement category and form is also required.  The effective date will be the first quarter of fiscal year 2019.  Early adoption of the provisions affecting the Company is not permitted.  The amendment will be adopted with a cumulative-effect adjustment to the balance sheet in the year of adoption.  The Company has not determined the potential effects on the consolidated financial statements.

8


 

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which supersedes ASC 840, Leases.  This ASU is based on the principle that entities should recognize assets and liabilities arising from leases.  The ASU does not significantly change the lessees’ recognition, measurement and presentation of expenses and cash flows from the previous accounting standard.  Leases are classified as finance or operating.  The ASU’s primary change is the requirement for entities to recognize a lease liability for payments and a right of use asset representing the right to use the leased asset during the term on operating lease arrangements.  Lessees are permitted to make an accounting policy election to not recognize the asset and liability for leases with a term of twelve months or less.  Lessors’ accounting under the ASC is largely unchanged from the previous accounting standard.  In addition, the ASU expands the disclosure requirements of lease arrangements.  Lessees and lessors will use a modified retrospective transition approach, which includes a number of practical expedients.  The effective date will be the first quarter of fiscal year 2020 with early adoption permitted.  The Company has not determined the potential effects on the consolidated financial statements.

 

(4)The after-tax changes in accumulated other comprehensive income (loss) in millions of dollars follow:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

 

    

 

 

    

 

 

    

 

 

    

Total

 

 

 

 

 

 

 

 

Unrealized

 

Unrealized

 

Accumulated

 

 

 

Retirement

 

Cumulative

 

Gain (Loss)

 

Gain (Loss)

 

Other

 

 

 

Benefits

 

Translation

 

on

 

on

 

Comprehensive

 

 

 

Adjustment

 

Adjustment

 

Derivatives

 

Investments

 

Income (Loss)

 

Balance October 31, 2015

 

$

(3,501)

 

$

(1,238)

 

$

(2)

 

$

12

 

$

(4,729)

 

Other comprehensive income (loss) items before reclassification

 

 

(2)

 

 

(158)

 

 

(1)

 

 

(10)

 

 

(171)

 

Amounts reclassified from accumulated other comprehensive income

 

 

40

 

 

 

 

 

1

 

 

(1)

 

 

40

 

Net current period other comprehensive income (loss)

 

 

38

 

 

(158)

 

 

 

 

 

(11)

 

 

(131)

 

Balance January 31, 2016

 

$

(3,463)

 

$

(1,396)

 

$

(2)

 

$

1

 

$

(4,860)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance October 31, 2014

 

$

(3,493)

 

$

(303)

 

 

 

 

$

13

 

$

(3,783)

 

Other comprehensive income (loss) items before reclassification

 

 

 

 

 

(510)

 

$

(3)

 

 

9

 

 

(504)

 

Amounts reclassified from accumulated other comprehensive income

 

 

42

 

 

 

 

 

2

 

 

(2)

 

 

42

 

Net current period other comprehensive income (loss)

 

 

42

 

 

(510)

 

 

(1)

 

 

7

 

 

(462)

 

Balance January 31, 2015

 

$

(3,451)

 

$

(813)

 

$

(1)

 

$

20

 

$

(4,245)

 

 

9


 

Following are amounts recorded in and reclassifications out of other comprehensive income (loss), and the income tax effects, in millions of dollars:

 

 

 

 

 

 

 

 

 

 

 

 

 

    

Before

    

Tax

    

After

 

 

 

Tax

 

(Expense)

 

Tax

 

Three Months Ended January 31, 2016

 

Amount

 

Credit

 

Amount

 

Cumulative translation adjustment

 

$

(158)

 

 

 

 

$

(158)

 

Unrealized gain (loss) on derivatives:

 

 

 

 

 

 

 

 

 

 

Unrealized hedging gain (loss)

 

 

(1)

 

 

 

 

 

(1)

 

Reclassification of realized (gain) loss to:

 

 

 

 

 

 

 

 

 

 

Interest rate contracts – Interest expense

 

 

3

 

$

(1)

 

 

2

 

Foreign exchange contracts – Other operating expense

 

 

(2)

 

 

1

 

 

(1)

 

Net unrealized gain (loss) on derivatives

 

 

 

 

 

 

 

 

 

 

Unrealized gain (loss) on investments:

 

 

 

 

 

 

 

 

 

 

Unrealized holding gain (loss)

 

 

(10)

 

 

 

 

 

(10)

 

Reclassification of realized (gain) loss – Other income

 

 

(1)

 

 

 

 

 

(1)

 

Net unrealized gain (loss) on investments

 

 

(11)

 

 

 

 

 

(11)

 

Retirement benefits adjustment:

 

 

 

 

 

 

 

 

 

 

Pensions

 

 

 

 

 

 

 

 

 

 

Net actuarial gain (loss)

 

 

(3)

 

 

1

 

 

(2)

 

Reclassification through amortization of actuarial (gain) loss and prior service (credit) cost to net income: *

 

 

 

 

 

 

 

 

 

 

Actuarial (gain) loss

 

 

52

 

 

(19)

 

 

33

 

Prior service (credit) cost

 

 

4

 

 

(2)

 

 

2

 

Settlements/curtailments

 

 

7

 

 

(2)

 

 

5

 

Health care and life insurance

 

 

 

 

 

 

 

 

 

 

Reclassification through amortization of actuarial (gain) loss and prior service (credit) cost to net income: *

 

 

 

 

 

 

 

 

 

 

Actuarial (gain) loss

 

 

19

 

 

(7)

 

 

12

 

Prior service (credit) cost

 

 

(19)

 

 

7

 

 

(12)

 

Net unrealized gain (loss) on retirement benefits adjustments

 

 

60

 

 

(22)

 

 

38

 

Total other comprehensive income (loss)

 

$

(109)

 

$

(22)

 

$

(131)

 

*These accumulated other comprehensive income amounts are included in net periodic postretirement costs.  See Note 7 for additional detail.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

10


 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

Before

    

Tax

    

After

 

 

 

Tax

 

(Expense)

 

Tax

 

Three Months Ended January 31, 2015

 

Amount

 

Credit

 

Amount

 

Cumulative translation adjustment

 

$

(508)

 

$

(2)

 

$

(510)

 

Unrealized gain (loss) on derivatives:

 

 

 

 

 

 

 

 

 

 

Unrealized hedging gain (loss)

 

 

(4)

 

 

1

 

 

(3)

 

Reclassification of realized (gain) loss to:

 

 

 

 

 

 

 

 

 

 

Interest rate contracts – Interest expense

 

 

3

 

 

 

 

 

3

 

Foreign exchange contracts – Other operating expense

 

 

(1)

 

 

 

 

 

(1)

 

Net unrealized gain (loss) on derivatives

 

 

(2)

 

 

1

 

 

(1)

 

Unrealized gain (loss) on investments:

 

 

 

 

 

 

 

 

 

 

Unrealized holding gain (loss)

 

 

13

 

 

(4)

 

 

9

 

Reclassification of realized (gain) loss – Other income

 

 

(2)

 

 

 

 

 

(2)

 

Net unrealized gain (loss) on investments

 

 

11

 

 

(4)

 

 

7

 

Retirement benefits adjustment:

 

 

 

 

 

 

 

 

 

 

Pensions

 

 

 

 

 

 

 

 

 

 

Reclassification through amortization of actuarial (gain) loss and prior service (credit) cost to net income: *

 

 

 

 

 

 

 

 

 

 

Actuarial (gain) loss

 

 

55

 

 

(20)

 

 

35

 

Prior service (credit) cost

 

 

6

 

 

(2)

 

 

4

 

Settlements/curtailments

 

 

1

 

 

 

 

 

1

 

Health care and life insurance

 

 

 

 

 

 

 

 

 

 

Reclassification through amortization of actuarial (gain) loss and prior service (credit) cost to net income: *

 

 

 

 

 

 

 

 

 

 

Actuarial (gain) loss

 

 

23

 

 

(9)

 

 

14

 

Prior service (credit) cost

 

 

(19)

 

 

7

 

 

(12)

 

Net unrealized gain (loss) on retirement benefits adjustments

 

 

66

 

 

(24)

 

 

42

 

Total other comprehensive income (loss)

 

$

(433)

 

$

(29)

 

$

(462)

 

*These accumulated other comprehensive income amounts are included in net periodic postretirement costs.  See Note 7 for additional detail.

In the first quarter of 2016 and 2015, the noncontrolling interests’ comprehensive income (loss) was $(.6) million and $(.2) million, respectively, which consisted of net income (loss) of $(.6) million and $.1 million and cumulative translation adjustments of none and $(.3) million, respectively.

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended 

 

 

 

January 31

 

 

 

2016

 

2015

 

Dividends declared

    

$

.60

    

$

.60

 

Dividends paid

 

$

.60

 

$

.60

 

 

 

 

11


 

(6)A  reconciliation of basic and diluted net income per share attributable to Deere & Company follows in millions, except per share amounts:

 

 

 

 

 

 

 

 

 

  

 

Three Months Ended