John Deere 2010 Annual Report Download

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COMMITTED TO THOSE
LINKED TO THE LAND
Deere & Company Annual Report 2010

Table of contents

  • Page 1
    COMMITTED TO THOSE LINKED TO THE LAND Deere & Company Annual Report 2010

  • Page 2
    ... evolution of the John Deere Strategy places a sharp focus on producing the agricultural and construction equipment Net Sales and Revenues (MM) solutions required by global markets that are gaining in $28,438 $23,112 $26,005 both size and stature. For fiscal 2010, Deere reported income of nearly...

  • Page 3
    ...reported almost twice as much operating profit and more than four times the level of SVA achieved in 2009. Deere's largest division efficiently managed assets, brought advanced new products to market and broadened its customer base. A&T results were aided by positive farm conditions and strong sales...

  • Page 4
    ... mechanization and food production. The two 5C models, with 35 and 41 horsepower, are the first John Deere tractors designed in India. Engineering and design responsibility for the company's entire global utility tractor line was transferred to India in 2010. Powerful Tailwinds Shaping Plans...

  • Page 5
    ... new combine-harvester facility in India. In December 2010, Deere announced plans for a construction-equipment factory in China for the production of four-wheel-drive loaders and excavators. These investments build on earlier ones that have added significantly to our capacity and marketing presence...

  • Page 6
    ... more emphasis on global expansion. The strategy concentrates the company's focus on two growth areas - agricultural and construction equipment solutions. Other operations - turf, forestry, parts, engines, intelligent solutions, and financial services - have vital roles supporting or complementing...

  • Page 7
    ... we do business. Extending Proud Record of Citizenship Being a responsible corporate citizen and a progressive employer are essential to being a great company. To this end, the company and the John Deere Foundation continued their support in 2010 of worthy organizations that address world hunger...

  • Page 8
    ... to help customers manage surface water and equipment operation with greater ef ficiency and precision. With respect to our employees, John Deere's exceptional safety record continued in 2010. More than half of over 100 company locations ended the year without a lost-time injury. About one...

  • Page 9
    ...rst time. - Quarterly dividend rate increased by 7% in third quarter; share repurchases resume, totaling nearly $360 million for year. - Exhibiting increasing focus on serving global markets, company opens a technology and innovation center in Germany; expands product research and development center...

  • Page 10
    ...2008 2009 2010 - John Deere Technology Center-India, at Pune, named global engineering lead for development of small tractors for all markets. - Results helped by higher sales of premium lawn tractors, utility vehicles and commercial mowing equipment. - Company's largest-ever product introduction...

  • Page 11
    ...equipment segment is assessed a pretax cost of assets - generally 12% of average identifiable operating assets with inventory at standard cost (believed to more closely approximate the current cost of inventory and the company's related investment). Financial-services businesses are assessed a cost...

  • Page 12
    ... of equipment for construction and forestry. The company's Financial Services primarily provide credit services, which mainly finance sales and leases of equipment by John Deere dealers and trade receivables purchased from the Equipment Operations. In addition, Financial Services offer crop risk...

  • Page 13
    ... and defined benefit health care and life insurance plans. The company's postretirement benefit costs for these plans in 2010 were $658 million, compared with $312 million in 2009, primarily due to a decrease in discount rates. The long-term expected return on plan assets, which is reï¬,ected...

  • Page 14
    ... new equipment models as well as increased product costs to comply with the regulations. In addition, the company projects higher raw material costs in 2011 and a less favorable sales mix in the agriculture and turf segment. Agriculture and Turf. Worldwide sales of the company's agriculture and turf...

  • Page 15
    ... supplies; the availability and cost of freight; actions of competitors in the various industries in which the company competes, particularly price discounting; dealer practices especially as to levels of new and used field inventories; labor relations; acquisitions and divestitures of businesses...

  • Page 16
    ... from crop insurance, narrower financing spreads and higher losses from construction equipment operating lease residual values, partially offset by a lower effective tax rate primarily from wind energy tax credits and lower selling, administrative and general expenses. Additional information is...

  • Page 17
    ... in accounts payable and accrued expenses, which were partially offset by an increase in trade receivables and inventories. Cash outï¬,ows from investing activities were $2,109 million in 2010, primarily due to the cost of receivables and equipment on operating leases exceeding the collections of...

  • Page 18
    .... FINANCIAL SERVICES The company's equipment businesses are capital intensive and are subject to seasonal variations in financing requirements for inventories and certain receivables from dealers. The Equipment Operations sell a significant portion of their trade receivables to Financial Services...

  • Page 19
    .... Capital expenditures in 2011 are not expected to be significant. The company sold the wind energy business for approximately $900 million after year end (see Notes 4 and 30). OFF-BALANCE-SHEET ARRANGEMENTS The company's credit operations offer crop insurance products through managing general...

  • Page 20
    ...by the company's actuaries in calculating these amounts. These assumptions include discount rates, health care cost trend rates, expected return on plan assets, compensation increases, retirement rates, mortality rates and other factors. Actual results that differ from the assumptions and changes in...

  • Page 21
    ... a combination of comparable market values for similar businesses and discounted cash ï¬,ows. These estimates can change significantly based on such factors as the reporting unit's financial performance, economic conditions, interest rates, growth rates, pricing, changes in business strategies and...

  • Page 22
    ... course of business and not for the purpose of creating speculative positions or trading. The company's credit operations manage the relationship of the types and amounts of their funding sources to their receivable and lease portfolio in an effort to diminish risk due to interest rate and foreign...

  • Page 23
    ... by the company's board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal...

  • Page 24
    ... Ended October 31, 2010, 2009 and 2008 (In millions of dollars and shares except per share amounts) 2010 _____ Net Sales and Revenues Net sales ...Finance and interest income ...Other income ...Total ...Costs and Expenses Cost of sales ...Research and development expenses ...Selling, administrative...

  • Page 25
    Deere & Company CONSOLIDATED BALANCE SHEET As of October 31, 2010 and 2009 (In millions of dollars except per share amounts) 2010 _____ ASSETS Cash and cash equivalents...Marketable securities ...Receivables from unconsolidated affiliates ...Trade accounts and notes receivable - net ...Financing ...

  • Page 26
    ...nancing receivables related to sales...Inventories ...Accounts payable and accrued expenses...Accrued income taxes payable/receivable ...Retirement benefits ...Other ...Net cash provided by operating activities...Cash Flows from Investing Activities Collections of receivables ...Proceeds from sales...

  • Page 27
    ......Unrealized loss on derivatives ...Unrealized gain on investments ...Total comprehensive income ...Repurchases of common stock ...Treasury shares reissued ...Dividends declared ...Stock options and other ...Balance October 31, 2009 ...Net income ...Other comprehensive income (loss) Retirement bene...

  • Page 28
    ...on sales of equipment. Service parts returns are estimable and accrued at the time a sale is recognized. The company makes appropriate provisions based on experience for costs such as doubtful receivables, sales incentives and product warranty. Financing revenue is recorded over the lives of related...

  • Page 29
    ... course of business and not for the purpose of creating speculative positions or trading. The company's credit operations manage the relationship of the types and amounts of their funding sources to their receivable and lease portfolio in an effort to diminish risk due to interest rate and foreign...

  • Page 30
    ... pretax net losses for foreign exchange in 2010, 2009 and 2008 were $75 million, $68 million and $13 million, respectively. 3. NEW ACCOUNTING STANDARDS New Accounting Standards Adopted In the first quarter of 2010, the company adopted Financial Accounting Standard Board (FASB) Accounting Standards...

  • Page 31
    ...ts paid to date. Voluntary Employee Separations The company combined the agricultural equipment segment and the commercial and consumer equipment segment into the agriculture and turf segment effective at the beginning of the third quarter of 2009. Voluntary employee separations related to the new...

  • Page 32
    ...percents: 2010 Health care and life insurance Service cost ...Interest cost ...Expected return on plan assets ...Amortization of actuarial losses ...Amortization of prior service credit ...Early-retirement benefits...Settlements/curtailments ...Net cost...Weighted-average assumptions Discount rates...

  • Page 33
    ... in comprehensive (income) loss ...$ 166 $2,186 $ 930 $ 231 $ 2,219 $ (228) Pensions _____ 2010 2009 Health Care and Life Insurance _____ 2010 2009 Change in plan assets (fair value) Beginning of year balance ...$ 8,401 $ 7,828 $ 1,666 $ 1,623 Actual return on plan assets...1,054 901 219 241...

  • Page 34
    ... follow: Pensions Net actuarial losses ...Prior service cost (credit) ...Total ...$ $ 151 41 192 Health Care and Life Insurance $ $ 270 (16) 254 The fair values of the pension plan assets by category at October 31, 2010 follow in millions of dollars: Total Cash and short-term investments...$ Equity...

  • Page 35
    ... of Level 3 pension and health care asset fair value measurements during 2010 in millions of dollars follows: Total Beginning balance ...$ 1,233 Realized gain ...21 Change in unrealized gain (loss) ...90 Purchases, sales and settlements - net ...99 Ending balance* ...$ 1,443 Real Estate $ 336...

  • Page 36
    ... for sales allowances ...361 Pension liabilities - net ...199 Accrual for employee benefits ...175 Tax over book depreciation...$ 521 Tax loss and tax credit carryforwards ...141 Lease transactions ...225 Allowance for credit losses...137 Goodwill and other intangible assets ...117 Stock option...

  • Page 37
    ... balance sheet under "Investments in unconsolidated affiliates." Combined financial information of the unconsolidated affiliated companies in millions of dollars follows: Operations Sales ...Net income (loss) ...Deere & Company's equity in net income (loss) ...Financial Position Total assets...

  • Page 38
    ... receivables to Financial Services and provide compensation to these operations at market rates of interest. Trade accounts and notes receivable primarily arise from sales of goods to independent dealers. Under the terms of the sales to dealers, interest is charged to dealers on outstanding balances...

  • Page 39
    ...: 2010 2009 Unrestricted/Restricted Unrestricted/Restricted Retail notes: Equipment: Agriculture and turf ...$ 11,740 Construction and forestry...920 Recreational products ...5 Total ...Wholesale notes ...Revolving charge accounts ...Financing leases (direct and sales-type) ...Operating loans...

  • Page 40
    ... receivables - net" on the balance sheet. The total restricted assets on the balance sheet related to these securitizations include the restricted financing receivables less an allowance for credit losses, and other assets primarily representing restricted cash. The SPEs supporting the secured...

  • Page 41
    ...a FIFO basis, estimated inventories by In the fourth quarter of 2010, the company signed an agreement to sell its wind energy business and reclassified the related net property and equipment of $908 million to assets held for sale. The property and equipment included in Financial Services that was...

  • Page 42
    ...cost of property and equipment in 2010 and 2009 of $23 million and $71 million, which were offset by cost reductions of $23 million and $70 million due to becoming eligible for government grants for certain wind energy investments related to costs recognized in prior and current periods. Capitalized...

  • Page 43
    ...: 2010 Equipment Operations Accounts payable: Trade payables ...$ 1,825 Dividends payable ...127 Other ...106 Accrued expenses: Employee benefits ...999 Product warranties ...560 Dealer sales discounts ...847 Accrued income taxes ...81 Other ...1,212 Total ...Financial Services Accounts payable...

  • Page 44
    ... amount of equipment that has been sold and is still under warranty based on dealer inventories and retail sales. The historical claims rate is primarily determined by a review of five-year claims costs and current quality developments. The premiums for the company's extended warranties are...

  • Page 45
    ... stock under this plan will be made from time to time, at the company's discretion, in the open market. A reconciliation of basic and diluted net income per share attributable to Deere & Company follows in millions, except per share amounts: 2010 2009 2008 Net income attributable to Deere & Company...

  • Page 46
    ... and transactions with stockholders. Following are the items included in other comprehensive income (loss) for Deere & Company and the related tax effects in millions of dollars: Before Tax Amount 2008 Retirement benefits adjustment: Net actuarial losses and prior service cost ...$ (567) Reclassi...

  • Page 47
    ... and related losses in millions of dollars follow: Fair Value* _____ 2010 2009 Retail notes ...$ Operating loans ...Financial leases ...Wholesale notes ...Financing receivables ...$ Trade receivables ...Goodwill ...$ 34 Property and equipment held for sale** ...$ 918 * Does not include cost to sell...

  • Page 48
    ... course of business and not for the purpose of creating speculative positions or trading. The company's credit operations manage the relationship of the types and amounts of their funding sources to their receivable and lease portfolio in an effort to diminish risk due to interest rate and foreign...

  • Page 49
    ... contracts were recorded in operating activities in the statement of consolidated cash ï¬,ows. Fair values of derivative instruments in the consolidated balance sheet at October 31 in millions of dollars follow: 2010 Other Assets Designated as hedging instruments: Interest rate contracts ...$ Not...

  • Page 50
    ... backhoe loaders; crawler dozers and loaders; four-wheel-drive loaders; excavators; motor graders; articulated dump trucks; landscape loaders; skid-steer loaders; and log skidders, feller bunchers, log loaders, log forwarders, log harvesters and related attachments. The products and services...

  • Page 51
    ... individual foreign country's net sales and revenues were material for disclosure purposes. GEOGRAPHIC AREAS 2010 2009 2008 Net sales and revenues Unaffiliated customers: U.S. and Canada: Equipment Operations net sales (88%)* ...$14,794 $ 13,022 $ 15,068 Financial Services revenues (82%)* ...1,817...

  • Page 52
    ... 2011 to stockholders of record on December 31, 2010. The new quarterly rate represents an increase of 5 cents per share over the previous level, or approximately 17 percent. On December 10, 2010, the company announced it has closed on the sale of John Deere Renewables, LLC, its wind energy business...

  • Page 53
    ... STATEMENT For the Years Ended October 31, 2010, 2009 and 2008 (In millions of dollars) EQUIPMENT OPERATIONS* 2010 2009 2008 Net Sales and Revenues Net sales ...Finance and interest income ...Other income ...Total ...Costs and Expenses Cost of sales ...Research and development expenses ...Selling...

  • Page 54
    ...) BALANCE SHEET As of October 31, 2010 and 2009 (In millions of dollars except per share amounts) EQUIPMENT OPERATIONS* 2010 2009 ASSETS Cash and cash equivalents...Marketable securities ...Receivables from unconsolidated subsidiaries and affiliates...Trade accounts and notes receivable - net...

  • Page 55
    ... equipment ...Proceeds from sales of businesses, net of cash sold ...34.9 Cost of receivables acquired ...Purchases of marketable securities ...(7.6) Purchases of property and equipment ...(735.5) (788.0) Cost of equipment on operating leases acquired ...Increase in investment in Financial Services...

  • Page 56
    ... FINANCIAL DATA (Dollars in millions except per share amounts) 2010 Net sales and revenues ...$26,005 Net sales ...23,573 Finance and interest income ...Research and development expenses ...Selling, administrative and general expenses ...Interest expense ...Income (loss) from continuing operations...

  • Page 57
    ... President, John Deere Power Systems, Worldwide Parts Services, Advanced Technology and Engineering, and Global Supply Management and Logistics JAMES R. JENKINS (10) Senior Vice President and General Counsel JAMES H. BECHT (31) Vice President and Deputy General Counsel, International JOHN J. DALHOFF...

  • Page 58
    ... managers and representatives of financial institutions may contact: Tony Huegel Director, Investor Relations Deere & Company One John Deere Place, Moline, IL 61265-8098 Phone: (309) 765-4491 www.JohnDeere.com STOCK EXCHANGES Deere & Company common stock is listed on the New York Stock Exchange...

  • Page 59
    ...at Deere's world headquarters in Moline, Illinois. SENIOR MANAGEMENT TEAM From left: David C. Everitt, Michael J. Mack, Jr., James R. Jenkins, Samuel R. Allen, Jean H. Gilles, James M. Field, Markwart von Pentz, and James A. Israel; shown with John Deere 1445 front mower, 329D compact track loader...

  • Page 60
    Deere & Company One John Deere Place Moline, Illinois 61265 (309) 765-8000 www.JohnDeere.com