John Deere 2010 Annual Report Download - page 37

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9. OTHER INCOME AND OTHER OPERATING EXPENSES
The major components of other income and other operating
expenses consisted of the following in millions of dollars:
2010 2009 2008
Other income
Revenues from services ............................. $ 474 $ 418 $ 421
Investment income .................................... 10 9 21
Other ........................................................ 122 87 124
Total ..................................................... $ 606 $ 514 $ 566
Other operating expenses
Depreciation of equipment on
operating leases .................................... $ 288 $ 288 $ 308
Cost of services ......................................... 344 357 295
Other ........................................................ 116 73 95
Total ..................................................... $ 748 $ 718 $ 698
10. UNCONSOLIDATED AFFILIATED COMPANIES
Unconsolidated affi liated companies are companies in which
Deere & Company generally owns 20 percent to 50 percent
of the outstanding voting shares. Deere & Company does not
control these companies and accounts for its investments in
them on the equity basis. The investments in these companies
primarily consist of Bell Equipment Limited (32 percent
ownership), Deere-Hitachi Construction Machinery Corporation
(50 percent ownership), Xuzhou XCG John Deere Machinery
Manufacturing Co., Ltd. (50 percent ownership), John Deere
Tiantuo Company, Ltd. (51 percent ownership) and A&I
Products (36 percent ownership). The unconsolidated affi liated
companies primarily manufacture or market equipment.
Deere & Company’s share of the income or loss of these
companies is reported in the consolidated income statement
under “Equity in income (loss) of unconsolidated affi liates.”
The investment in these companies is reported in the consolidated
balance sheet under “Investments in unconsolidated affi liates.”
Combined fi nancial information of the unconsolidated
affi liated companies in millions of dollars follows:
Operations 2010 2009 2008
Sales ........................................................ $ 1,502 $ 1,404 $ 2,214
Net income (loss) ...................................... 23 (23) 99
Deere & Company’s equity in
net income (loss) ................................... 11 (6) 40
Financial Position 2010 2009
Total assets ............................................................. $ 1,3 00 $ 1,157
Total external borrowings ......................................... 201 264
Total net assets ....................................................... 584 515
Deere & Company’s share of
the net assets ..................................................... 244 213
Consolidated retained earnings at October 31, 2010
include undistributed earnings of the unconsolidated affi liates
of $88 million. Dividends from unconsolidated affi liates were
$6 million in 2010, $.4 million in 2009 and $20 million in 2008.
second quarter of 2010, which was the period in which the
legislation was enacted. As a result of the legislation, the
company’s tax expenses increased approximately $130 million
in 2010.
A reconciliation of the total amounts of unrecognized tax
benefi ts at October 31 in millions of dollars follows:
2010 2009 2008
Beginning of year balance ....................... $ 26 0 $ 23 6 $ 218
Increases to tax positions taken during
the current year ....................................... 36 29 23
Increases to tax positions taken during
prior years............................................... 83 12 31
Decreases to tax positions taken during
prior years............................................... (133) (28) (20)
Decreases due to lapse of statute of
limitations ............................................... (2) (3) (3)
Set t lements ................................................. (19) (5)
Acquisitions ................................................. 2
Foreign exchange ........................................ (7) 19 (15)
End of year balance ................................. $ 218 $ 260 $ 236
The amount of unrecognized tax benefi ts at October 31,
2010 that would affect the effective tax rate if the tax benefi ts
were recognized was $69 million. The remaining liability was
related to tax positions for which there are offsetting tax
receivables, or the uncertainty was only related to timing.
The company expects that any reasonably possible change in
the amounts of unrecognized tax benefi ts in the next twelve
months would not be signifi cant.
The company fi les its tax returns according to the tax
laws of the jurisdictions in which it operates, which includes
the U.S. federal jurisdiction, and various state and foreign
jurisdictions. The U.S. Internal Revenue Service has completed
the examination of the company’s federal income tax returns
for periods prior to 2007. The years 2007, 2008 and 2009
federal income tax returns are either currently under examination
or remain subject to examination. Various state and foreign
income tax returns, including major tax jurisdictions in
Canada and Germany, also remain subject to examination by
taxing authorities.
The company’s policy is to recognize interest related to
income taxes in interest expense and interest income, and
recognize penalties in selling, administrative and general
expenses. During 2010, 2009 and 2008, the total amount of
expense from interest and penalties was $3 million, $4 million
and $23 million and the interest income was $5 million,
$3 million and $2 million, respectively. At October 31, 2010
and 2009, the liability for accrued interest and penalties totaled
$41 million and $47 million and the receivable for interest was
$5 million and $4 million, respectively.