John Deere 2009 Annual Report Download

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Deere & Company Annual Report 2009
GROWING
A BUSINESS AS GREAT AS OUR PRODUCTS

Table of contents

  • Page 1
    GROWING A BUSINESS AS GREAT AS OUR PRODUCTS Deere & Company Annual Report 2009

  • Page 2
    ... Deere achieve world-class status in asset ef ficiency. The company grew globally as well, making major investments in Brazil, Russia, China and India, among other markets. Lane felt strongly that the way to improve performance on a sustained basis was through the efforts of employees, dealers...

  • Page 3
    ... of assets. For some time now, we have been developing a cost and asset model that aspires for all our businesses to earn their cost of capital - and thus deliver SVA, or Shareholder Value Added - in even the worst markets. In 2009, our equipment operations reported slightly positive SVA in spite of...

  • Page 4
    ... such as ethanol. As a result of growing Part of the company's largest-ever launch of golf course equipment, the 7500 E-Cut mower is one of three new fairway models built on hybrid technology. Machine has more power but offers quieter operation and improved fuel economy. Electric-driven cutting...

  • Page 5
    ... a new lineup of high-powered row-crop tractors, as well as the company's largest-ever planter and most powerful forage harvester. Deere also brought out a new family of innovative zero-turn-radius mowers for commercial customers and had a major launch of golf course mowing and maintenance equipment...

  • Page 6
    .... Marketed primarily in Europe, series wins innovation award in U.K. in 2009. One of nine new highly productive, reliable D-series skid steer and compact track loader models, the 318D skid steer offers easier operation and servicing. Among its features is an enhanced cab for productivity and...

  • Page 7
    New for 2009, the John Deere DB120 planter sets the standard for size and productivity in the large-frame market. The 48-row, 120-foot-wide planter is company's largest model. Award-winning technology allows for precise control of planting units. That helps reduce input costs and the chance of ...

  • Page 8
    ... portfolio. • Farm Plan - which provides accounts-receivable management and sales finance for ag producers through John Deere dealers and ag input retailers - grows more than 5% despite declining input prices. • John Deere Risk Protection extends growth record, providing crop insurance on more...

  • Page 9
    ...other markets. • C&F launches E-series wheeled cut-to-length forestry equipment with rotating and leveling cabs; new D-series skid steers and compact track loaders respond to customer need for bigger, quieter cabs, easier operation and servicing. • Sales begin of innovative high-speed dozer; new...

  • Page 10
    ... SVA, each 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...

  • Page 11
    ...; lawn and turf care equipment, landscaping and irrigation products; and a broad range 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...

  • Page 12
    ...Accounting Policies" for more information about postretirement benefit obligations. BUSINESS SEGMENT AND GEOGRAPHIC AREA RESULTS Worldwide Agriculture and Turf Operations The agriculture and turf segment had an operating profit of $1,448 million in 2009, compared with $2,461 million in 2008. Net...

  • Page 13
    ... housing starts. Credit. Net income in fiscal year 2010 for the company's credit operations is forecast to be approximately $240 million. The forecast increase from 2009 primarily is due to higher commissions from crop insurance and increased revenue from wind energy projects. SAFE HARBOR STATEMENT...

  • Page 14
    ...as combining of the agricultural and commercial and consumer equipment segments; changes in company declared dividends and common stock issuances and repurchases. Company results are also affected by changes in the level of employee retirement benefits, changes in market values of investment assets...

  • Page 15
    ... expenses, higher research and development costs and expenses to close a facility in Canada. Worldwide Construction and Forestry Operations The construction and forestry segment had an operating profit of $466 million in 2008, compared with $571 million in 2007. Net sales decreased 4 percent...

  • Page 16
    ...company's commercial paper outstanding at October 31, 2009 and 2008 was $286 million and $2,961 million, respectively, while the total cash and cash equivalents and marketable securities position was $4,844 million and $3,189 million, respectively. On December 4, 2008, John Deere Capital Corporation...

  • Page 17
    ... volumes. The ratio of trade accounts and notes receivable at October 31 to fiscal year net sales was 13 percent in 2009 and 2008. Total worldwide agriculture and turf receivables decreased $354 million and construction The company's equipment businesses are capital intensive and are subject to...

  • Page 18
    ... in both years. Capital expenditures for 2010 are estimated to be approximately $200 million, also primarily related to investments in wind energy generation. OFF-BALANCE-SHEET ARRANGEMENTS The company's credit operations offer crop insurance products through managing general agency agreements...

  • Page 19
    ... rate is primarily determined by a review of five-year claims costs and consideration of current quality developments. Variances in claims experience and the type of warranty programs affect these estimates, which are reviewed quarterly. The product warranty accruals, excluding extended warranty...

  • Page 20
    ...-cash charge in cost of sales of $289 million pretax, or $274 million after-tax. The charge was related to a write-down of the goodwill associated with the company's John Deere Landscapes reporting unit, which is included in the agriculture and turf operating segment. The key factor contributing to...

  • Page 21
    ...adverse effect on the 2009 net cash inï¬,ows. In the Financial Services operations, the company's policy is to hedge the foreign currency risk if the currency of the borrowings does not match the currency of the receivable portfolio. As a result, a hypothetical 10 percent adverse change in the value...

  • Page 22
    ...an audit report on the effectiveness of the company's internal control over financial reporting. This report appears below. December 17, 2009 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Deere & Company: We have audited the accompanying consolidated balance sheets of Deere & Company and...

  • Page 23
    Deere & Company STATEMENT OF CONSOLIDATED INCOME For the Years Ended October 31, 2009, 2008 and 2007 (In millions of dollars and shares except per share amounts) 2009 _____ Net Sales and Revenues Net sales ...Finance and interest income ...Other income ...Total ...Costs and Expenses Cost of sales ...

  • Page 24
    Deere & Company CONSOLIDATED BALANCE SHEET As of October 31, 2009 and 2008 (In millions of dollars except per share amounts) 2009 _____ ASSETS Cash and cash equivalents...Marketable securities ...Receivables from unconsolidated affiliates ...Trade accounts and notes receivable - net ...Financing ...

  • Page 25
    ... from sales of businesses, net of cash sold ...Cost of receivables acquired ...Purchases of marketable securities ...Purchases of property and equipment ...Cost of equipment on operating leases acquired ...Acquisitions of businesses, net of cash acquired ...Other ...Net cash used for investing...

  • Page 26
    Deere & Company STATEMENT OF CHANGES IN CONSOLIDATED STOCKHOLDERS' EQUITY For the Years Ended October 31, 2007, 2008 and 2009 (In millions of dollars) Accumulated Other Comprehensive Income (Loss) Total Equity Common Stock Treasury Stock Retained Earnings Balance October 31, 2006 ......

  • Page 27
    ... Structure of Operations Certain 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...

  • Page 28
    ... and its customers. These taxes may include sales, use, value-added and some excise taxes. The company reports the collection of these taxes on a net basis (excluded from revenues). Securitization of Receivables Certain financing receivables are periodically transferred to special purpose entities...

  • Page 29
    ... value must be shown separately on the balance sheet. The company did not change the valuation of any financial instruments at adoption based on this standard. The cumulative effect of adoption would have been reported as an adjustment to beginning retained earnings. In the first quarter of 2009...

  • Page 30
    ... customer needs while reducing overall costs. The company further expects the combination will extend the reach of turf management equipment, utility vehicles and lower horsepower equipment through the improved access to established global markets. Voluntary employee separations related to the new...

  • Page 31
    ... 2009, the company recorded a non-cash charge in cost of sales for the impairment of goodwill of $289 million pretax, or $274 million after-tax. The charge was associated with the company's John Deere Landscapes reporting unit, which is included in the agriculture and turf operating segment. The key...

  • Page 32
    ... The company expects to contribute approximately $256 million to its pension plans and approximately $134 million to its health care and life insurance plans in 2010, which include direct benefit payments on unfunded plans. Funded status ...$ (1,307) $ Weighted-average assumptions Discount rates...

  • Page 33
    ... U.S. Internal Revenue Code and maintained in a separate account in the company's pension plan trust. The company has defined contribution plans related to employee investment and savings plans primarily in the U.S. The company's contributions and costs under these plans were $131 million in 2009...

  • Page 34
    ... tax returns. At October 31, 2009, certain tax loss and tax credit carryforwards for $204 million were available with $136 million expiring from 2011 through 2029 and $68 million with an unlimited expiration date. The company adopted FASB ASC 740, Income Taxes (FASB Interpretation No. 48, Accounting...

  • Page 35
    ...consolidated balance sheet under "Investments in Unconsolidated Affiliates." Combined financial information of the unconsolidated affiliated companies in millions of dollars is as follows: Operations Sales ...Net income (loss) ...Deere & Company's equity in net income (loss) ...Financial Position...

  • Page 36
    ... 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, from the earlier of the date when goods are sold to retail customers by...

  • Page 37
    ...017 _____ $ 1,645 The residual values for investments in financing leases at October 31, 2009 and 2008 totaled $59 million and $63 million, respectively. Financing receivables have significant concentrations of credit risk in the agriculture and turf sector and construction and forestry sector as...

  • Page 38
    ... in turn issue debt to investors. The resulting secured borrowings are included in short-term borrowings on the balance sheet. The securitized retail notes are recorded as "Restricted financing receivables - net" on the balance sheet. The total restricted assets on the balance sheet related to...

  • Page 39
    ... payments to be received on operating leases totaled $800 million at October 31, 2009 and are scheduled as follows in millions of dollars: 2010 - $355, 2011 - $222, 2012 - $132, 2013 - $72 and 2014 - $19. 15. INVENTORIES 27 16 6 Most inventories owned by Deere & Company and its U.S. equipment...

  • Page 40
    ... to both Deere & Company and Capital Corporation. At October 31, 2009, $4,214 million of these worldwide lines of credit were unused. For the purpose of computing the unused credit lines, commercial paper and short-term bank borrowings, excluding secured borrowings and the current portion of...

  • Page 41
    ... millions of dollars: 2009 2008 Equipment Operations Accounts payable: Trade payables ...$ 1,093 $ 1,773 Dividends payable ...118 118 Other ...131 108 Accrued expenses: Employee benefits ...861 1,175 Product warranties ...513 586 Dealer sales discounts ...774 711 Accrued income taxes ...5 79 Other...

  • Page 42
    ...) with insurance companies (Insurance Carriers) rated "Excellent" by A.M. Best Company. As a managing general agent, John Deere Risk Protection, Inc. will receive commissions from the Changes in the common stock account in millions were as follows: Number of Shares Issued Balance at October...

  • Page 43
    ... if the employee is eligible to retire or on a straight-line basis over the vesting period for the entire award. According to these plans at October 31, 2009, the company is authorized to grant an additional 11.2 million shares related to stock options or restricted stock. The fair value of each...

  • Page 44
    ... 31, 2009, the company had 113 million shares in treasury stock and 123 million shares remaining to be repurchased under its current publicly announced repurchase program (see Note 23). 25. OTHER COMPREHENSIVE INCOME ITEMS Before Tax Amount 2008 Retirement benefits adjustment: Net actuarial losses...

  • Page 45
    ...: Equipment Operations ...$ 3,073 $ 3,303 $ 1,992 $ 1,895 Financial Services ...14,319 14,818 11,907 11,112 Total ...$ 17,392 $ 18,121 $ 13,899 $ 13,007 * See Note 18. 2009 _____ Total Level 1 Level 2 Accounts payable and accrued expenses Derivatives: Interest rate contracts ...Foreign exchange...

  • Page 46
    ...the normal 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...

  • Page 47
    ... management systems technology; precision agricultural irrigation equipment and supplies; landscape and nursery products; and other outdoor power products. The construction and forestry segment manufactures, distributes to dealers and sells at retail a broad range of machines and service parts used...

  • Page 48
    ... based on market prices. Information relating to operations by operating segment in millions of dollars follows. In addition to the following unaffiliated sales and revenues by segment, intersegment sales and revenues in 2009, 2008 and 2007 were as follows: agriculture and turf net sales of $32...

  • Page 49
    ... _____ _____ 29. SUPPLEMENTAL INFORMATION (UNAUDITED) Common stock per share sales prices from New York Stock Exchange composite transactions quotations follow: First Quarter 2009 Market price High ...Low ...2008 Market price High ...Low ...Second Quarter Third Quarter Fourth Quarter $ 45.99 $ 42...

  • Page 50
    .... The consolidated group data in the "Equipment Operations" income statement reï¬,ect the results of the agriculture and turf operations and construction and forestry operations. The supplemental "Financial Services" data represent primarily Deere & Company's credit operations. Transactions between...

  • Page 51
    ... DATA (continued) BALANCE SHEET As of October 31, 2009 and 2008 (In millions of dollars except per share amounts) EQUIPMENT OPERATIONS* 2009 2008 ASSETS Cash and cash equivalents...$ 3,689.8 Marketable securities ...Receivables from unconsolidated subsidiaries and affiliates...461.4 Trade accounts...

  • Page 52
    ....6) Capital investment from Equipment Operations ...Dividends paid ...(473.4) (448.1) Excess tax benefits from share-based compensation ...4.6 72.5 Other ..._____ (25.8) _____ .1 Net cash provided by (used for) financing activities ..._____ 1,326.6 _____ (2,455.6) Effect of Exchange Rate Changes...

  • Page 53
    DEERE & COMPANY SELECTED FINANCIAL DATA (Dollars in millions except per share amounts) 2009 Net sales and revenues ...$ 23,112 Net sales ...20,756 Finance and interest income ...Research and development expenses ...Selling, administrative and general expenses ...Interest expense ...Income (loss) ...

  • Page 54
    ... contact: Marie Ziegler Vice President, 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 under the ticker symbol DE. FORM 10-K The annual report...

  • Page 55
    ... DIRECTORS SAMUEL R. ALLEN* President and Chief Executive Officer Deere & Company CRANDALL C. BOWLES (13) Chairman, Springs Industries, Inc., Chairman, The Springs Company home furnishings VANCE D. COFFMAN (5) Retired Chairman Lockheed Martin Corporation aerospace, defense and information technology...

  • Page 56
    ..., the John Deere 7950i self-propelled forage harvester gives customers efficient power and reliability to handle demanding harvest jobs. The machine features a monitoring system that logs bearing vibrations and alerts the operator of changes due to wear. Innovative system wins silver award at 2009...