John Deere 2013 Annual Report Download - page 40

in a higher proportion of liquid securities. These assets are in
addition to the other postretirement health care plan assets that
have been funded under Section 401(h) of the 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
$178 million in 2013, $155 million in 2012 and $108 million
in 2011. The contribution rate varies primarily based on the
company’s performance in the prior year and employee
participation in the plans.
8. INCOME TAXES
The provision for income taxes by taxing jurisdiction and
by sig nificant component consisted of the following in millions
of dollars:
2013 2012 2011
Current:
U.S.:
Federal ..................................................... $ 1,405 $ 1,277 $ 928
State ........................................................ 145 119 144
Foreign ......................................................... 569 355 520
Total current ......................................... 2,119 1,751 1,592
Deferred:
U.S.:
Federal ..................................................... (117) (76) (135)
State ........................................................ (11) (7) (28)
Foreign ......................................................... (45) (9) (5)
Total deferred ....................................... (173 ) (92) (168)
Provision for income taxes ........................... $ 1,946 $ 1,659 $ 1,424
Based upon the location of the company’s operations, the
consolidated income before income taxes in the U.S. in 2013,
2012 and 2011 was $4,124 million, $3,582 million and $2,618
million, respectively, and in foreign countries was $1,359 million,
$1,152 million and $1,605 million, respectively. Certain foreign
operations are branches of Deere & Company and are, there-
fore, subject to U.S. as well as foreign income tax regulations.
The pretax income by location and the preceding analysis of
the income tax provision by taxing jurisdiction are, therefore,
not directly related.
A comparison of the statutory and effective income tax
provision and reasons for related differences in millions of
dollars follow:
2013 2012 2011
U.S. federal income tax provision
at a statutory rate of 35 percent ................ $ 1,919 $ 1,657 $ 1,478
Increase (decrease) resulting from:
State and local income taxes, net of
federal income tax benefit ............................... 87 73 75
German branch deferred tax write-off ................... 56
Nontaxable foreign partnership (earnings) losses .. 43 (172)
Nondeductible impairment charges ...................... 29 6
Research and development tax credits ............... (56) (10) (38)
(continued)
2013 2012 2011
Tax rates on foreign earnings ............................. (34) (69) (70)
Valuation allowance on foreign deferred taxes ..... (14) 200 18
Other-net .......................................................... (84) (26) (39)
Provision for income taxes ........................... $ 1,9 46 $ 1,659 $ 1,4 24
At October 31, 2013, accumulated earnings in certain
subsidiaries outside the U.S. totaled $4,297 million for which
no provision for U.S. income taxes or foreign withholding taxes
has been made, because it is expected that such earnings will be
reinvested outside the U.S. indefinitely. Determination of the
amount of unrecognized deferred tax liability on these unremit-
ted earnings is not practicable. At October 31, 2013, the
amount of cash and cash equivalents and marketable securities
held by these foreign subsidiaries was $559 million.
Deferred income taxes arise because there are certain
items that are treated differently for financial accounting than
for income tax reporting purposes. An analysis of the deferred
income tax assets and liabilities at October 31 in millions of
dollars follows:
2013 2012
______________ _______________
Deferred Deferred Deferred Deferred
Tax Tax Tax Tax
Assets Liabilities Assets Liabilities
Other postretirement
benefit liabilities ....................... $ 1,777 $ 2,136
Tax over book depreciation ............ $ 582 $ 606
Accrual for sales allowances ......... 602 546
Pension liabilities - net .................. 457
Lease transactions ....................... 424 317
Pension asset - net ....................... 137
Tax loss and tax credit
carryforwards .......................... 371 249
Accrual for employee benefits ....... 234 249
Share-based compensation .......... 142 133
Inventory ...................................... 161 131
Goodwill and other
intangible assets ...................... 100 110
Allowance for credit losses ............ 69 92
Deferred gains on distributed
foreign earnings ....................... 26 84
Deferred compensation ................. 44 40
Undistributed foreign earnings ....... 26 11
Other items .................................. 419 157 443 115
Less valuation allowances ............. (254) (285)
Deferred income tax
assets and liabilities ............ $ 3,591 $ 1,426 $ 4,275 $ 1,159
Deere & Company files a consolidated federal income tax
return in the U.S., which includes the wholly-owned financial
services subsidiaries. These subsidiaries account for income taxes
generally as if they filed separate income tax returns.
At October 31, 2013, certain tax loss and tax credit
carryforwards of $371 million were available with $127 million
expiring from 2014 through 2033 and $244 million with an
indefinite carryforward period.
In March 2013, the company changed the corporate
structure of most of its German operations from a branch to a
subsidiary of Deere & Company. The change provides the
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