John Deere 2014 Annual Report Download

Download and view the complete annual report

Please find the complete 2014 John Deere annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 68

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68

FEET ON THE GROUND
EYES ON THE HORIZON
Deere & Company
Annual Report 2014
DEERE & COMPANY ANNUAL REPORT 2014

Table of contents

  • Page 1
    Deere & Company Annual Report 2014 FEET ON THE GROUND EYES ON THE HORIZON

  • Page 2
    ...2014, Deere boosted its quarterly dividend rate by 18%, to 60 cents per share. It was the 12th dividend increase since 2004. Over this time, the company returned more than half of its cash flow from operations to investors through dividends and share repurchases (net of issuances). 2012 2013 2014...

  • Page 3
    ...% since 2000. 2002 2005 2008 2011 2014 Carrying out our growth plans requires an extensive commitment to advanced new products DQGHIÆŸFLHQWPDQXIDFWXULQJFDSDFLW\7KLVLV illustrated by last year's combined expenditure of $2.5 billion for R&D and capital projects. 1,700 1999/2000 Source: USDA...

  • Page 4
    ... projects, these dollars allowed us to return a record amount to investors through dividends and share repurchases. Since 2004, the company has increased the quarterly dividend rate on 12 occasions and repurchased more than 200 million shares of stock. Production-class construction equipment...

  • Page 5
    ... operations and contractors. Real-time crop monitoring works in both corn and grass, an industry exclusive. The company's balance sheet has remained strong. At year-end, Deere carried some $5 billion of cash and securities. Our equipment operations had relatively low debt, while financial services...

  • Page 6
    ... prices and an improving U.S. housing market are fueling sales of forestry equipment, such as this 2154D forestry swing machine. By the use of different heads, this versatile machine can build logging roads, delimb trees, cut trees to exact length, or load logs. What's more, while crop supplies...

  • Page 7
    ... many others. In 2014, new factories for construction equipment were officially opened in Brazil. In other moves, the company completed the sale of its irrigation unit and of a majority interest of its landscapes operation. We also reached agreement to sell our crop insurance business. By narrowing...

  • Page 8
    ... commercial-scale forage harvesters and the first Deere-built large square balers. To serve the needs of larger contractors, Construction & Forestry introduced a new production-class crawler dozer and moved ahead with plans to bring out a large hybrid-electric four-wheeldrive loader in 2015...

  • Page 9
    ... priced to win over new customers in the large-property segment. DEALERS MAKING CONTRIBUTION John Deere's success is closely tied to the strength of our dealership network and our ability to provide professional after-market service. Last year, in support of our new construction-equipment factories...

  • Page 10
    ..., nurture, and develop top employee talent. To support growth for construction equipment outside the U.S., Deere inaugurated two factories in Brazil early in 2014, one with joint-venture partner Hitachi. Here, employee Adriano Santos da Silva connects hydraulic lines on a backhoe loader. 10

  • Page 11
    ...people live better lives through our commitment to those linked to the land, we express our thanks for your continued support. Deere's senior management team shown at company headquarters in Moline, Illinois. From left: Jim Field, John May, Sam Allen, Mark von Pentz, Raj Kalathur, Jean Gilles, Mary...

  • Page 12
    ... Construction & Forestry sales. $2,602 SVA (MM) $3,147 $2,437 2013 2014 - Combined dividend payments and share repurchases total a record $3.5 billion; quarterly dividend rate boosted to 60 cents; company repurchases 31.5 million shares. - Maintaining focus on core equipment businesses, Deere...

  • Page 13
    ...2012 2013 2014 - Focusing on important markets, company introduces new large square balers, windrowers, and self-propelled forage harvesters for commercial-scale operations and contractors, and diesel commercial mowers for landscape and turf contractors. - Supporting growth in Asia, company holds...

  • Page 14
    ...[ $250 $200 $150 $100 $50 $0 2009 Deere & Company 2012 2013 2014 - Provision for credit losses remains historically low at RIDYHUDJHSRUWIROLRZHOOEHORZDQG\HDUDYHUDJHV 2010 2011 S&P 500 2012 2013 2014 S&P 500 Construction & Farm Machinery - Expanding customer access to...

  • Page 15
    ...DQG equally ambitious returns at other points in the cycle. (For purposes of this calculation, operating assets DUHDYHUDJHLGHQWLÆŸDEOHDVVHWVGXULQJWKH\HDUZLWK inventories valued at standard cost.) FINANCIAL SERVICES $MM unless indicated Net Income Attributable to Deere & Company p y Average...

  • Page 16
    ... Positions as of December 31, 2014 SAMUEL R. ALLEN (39) Chairman and Chief Executive Officer JEAN H. GILLES (34) Senior Vice President, John Deere Power Systems, Worldwide Parts Services, Advanced Technology & Engineering, and Global Supply Management & Logistics MARY K.W. JONES (17) Senior Vice...

  • Page 17
    ... & Company World Headquarters. SAMUEL R. ALLEN (5) Chairman and Chief Executive Officer, Deere & Company CRANDALL C. BOWLES (18) Chairman, The Springs Company asset management company VANCE D. COFFMAN (10) Retired Chairman, Lockheed Martin Corporation aerospace, defense and information technology...

  • Page 18
    ... Securities analysts, portfolio managers, and representatives RIÆŸQDQFLDOLQVWLWXWLRQVPD\FRQWDFW Tony Huegel Director, Investor Relations Deere & Company 2QH-RKQ'HHUH3ODFH0ROLQH 3KRQH www.JohnDeere.com/Investors STOCK EXCHANGES Deere & Company common stock is listed on the New York Stock...

  • Page 19
    ...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 mitigation products and extended equipment warranties. The information...

  • Page 20
    ... value and sale of the Water operations, partially offset by impairment charges in 2013 for the Landscapes operations (see Notes 4 and 5). The company has several defined benefit pension plans and defined benefit health care and life insurance plans. The company's postretirement benefit costs...

  • Page 21
    ...infrastructure investment, spending by municipalities and golf courses, and consumable input costs. General economic conditions, consumer spending patterns, real estate and housing prices, the number of housing starts and interest rates are especially important to sales of the company's construction...

  • Page 22
    ... of John Deere Capital Corporation and other credit subsidiaries depend largely on timely access to capital in order to meet future cash ï¬,ow requirements, to fund operations and costs associated with engaging in diversified funding activities, and to fund purchases of the company's products. If...

  • Page 23
    ...-lived assets related to the Water operations and a write down to realizable value of the assets being held for sale for the Landscapes operations (see Notes 4 and 5). The equipment operations' net income was $2,974 million in 2013, compared with $2,616 million in 2012. The same operating factors...

  • Page 24
    ... income taxes payable/receivable and a change in the retirement benefits, which were partially offset by increases in receivables related to sales, inventories and insurance receivables. Cash outï¬,ows from investing activities were $2,881 million in 2014, due primarily to the cost of receivables...

  • Page 25
    ... in 2013. Capital expenditures in 2015 are estimated to be $875 million. 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...

  • Page 26
    ... in payables owed to Deere & Company and the change in investment from Deere & Company. The financial services operations' ratio of total interest-bearing debt to total stockholder's equity was to 7.4 to 1 at the end of 2014, 7.3 to 1 at the end of 2013 and 7.2 to 1 at the end of 2012. The Capital...

  • Page 27
    ... rates, pricing, changes in business strategies and competition. Based on this testing, the company identified a reporting unit in 2012 for which the goodwill was impaired. None were impaired in 2014 and 2013. In the fourth quarter of 2012, the company recorded a non-cash charge in cost of sales...

  • Page 28
    ... increase the company's annual depreciation for equipment on operating leases by approximately $125 million. FINANCIAL INSTRUMENT MARKET RISK INFORMATION financial services operations manage the relationship of the types and amounts of their funding sources to their receivable and lease portfolio...

  • Page 29
    ... effected 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...

  • Page 30
    Deere & Company STATEMENT OF CONSOLIDATED INCOME For the Years Ended October 31, 2014, 2013 and 2012 (In millions of dollars) 2014 _____ Net Sales and Revenues Net sales ...Finance and interest income ...Other income ...Total ...Costs and Expenses Cost of sales ...Research and development expenses ...

  • Page 31
    Deere & Company STATEMENT OF CONSOLIDATED COMPREHENSIVE INCOME For the Years Ended October 31, 2014, 2013 and 2012 (In millions of dollars) 2014 _____ Net Income ...Other Comprehensive Income (Loss), Net of Income Taxes Retirement benefits adjustment...Cumulative translation adjustment...Unrealized ...

  • Page 32
    Deere & Company CONSOLIDATED BALANCE SHEET As of October 31, 2014 and 2013 (In millions of dollars except per share amounts) 2014 _____ ASSETS Cash and cash equivalents...Marketable securities ...Receivables from unconsolidated affiliates ...Trade accounts and notes receivable - net ...Financing ...

  • Page 33
    ...: Trade, notes and financing receivables related to sales...Insurance receivables ...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...

  • Page 34
    ...For the Years Ended October 31, 2012, 2013 and 2014 (In millions of dollars) Deere & Company Stockholders Total Stockholders' Equity Balance October 31, 2011 ...Net income...Other comprehensive loss ...Repurchases of common stock ...Treasury shares reissued ...Dividends declared ...Stock options and...

  • Page 35
    ... exists on sales of equipment. Service parts and certain attachments 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...

  • Page 36
    ...pretax net losses for foreign exchange in 2014, 2013 and 2012 were $47 million, $26 million and $96 million, respectively. 3. NEW ACCOUNTING STANDARDS New Accounting Standards Adopted In the first quarter of 2014, the company adopted Financial Accounting Standards Board (FASB) Accounting Standards...

  • Page 37
    ... of the outstanding capital stock of Landscapes on an as-converted basis. At October 31, 2013, the total assets of $505 million and liabilities of $120 million for these operations were classified as held for sale in the consolidated financial statements and written down to realizable value, which...

  • Page 38
    ...investing activities that were not included in the statement of consolidated cash ï¬,ows. The company transferred inventory to equipment on operating leases of $794 million, $659 million and $563 million in 2014, 2013 and 2012, respectively. The company also had accounts payable related to purchases...

  • Page 39
    ... of dollars were as follows: 2014 2013 2012 Health care and life insurance Net cost ...$ 268 $ 362 $ 351 Retirement benefit adjustments included in other comprehensive (income) loss: Net actuarial (gain) loss ...748 (1,165) 335 Prior service (credit) cost ...(370) (2) 2 Amortization of actuarial...

  • Page 40
    ... _____ 2014 2013 Amounts recognized in balance sheet Noncurrent asset ...$ Current liability ...Noncurrent liability ...Total ...$ Health Care and Life Insurance _____ 2014 2013 Change in benefit obligations Beginning of year balance ...$ (10,968) $(11,834) $ (5,926) $ (7,023) Service cost ...(244...

  • Page 41
    ... Health Care and Life Insurance* $ 327 334 350 353 353 1,754 The fair values of the pension plan assets at October 31, 2014 follow in millions of dollars: Total Cash and short-term investments...$ Equity: U.S. equity securities...U.S. equity funds...International equity securities ...International...

  • Page 42
    ...data such as interest rates, yield curves, volatilities, credit risk and prepayment speeds, or they are valued using the closing prices in the active market in which the fixed income investment trades. Fixed income funds are valued using the NAV, based on the fair value of the underlying securities...

  • Page 43
    ... market related value of the health care and life insurance plan assets equal fair value. The expected return is based on the outlook for inï¬,ation and for returns in multiple asset classes, while also considering historical returns, asset allocation and investment strategy. The company's approach...

  • Page 44
    ... follows: 2014 2013 Deferred Deferred Deferred Deferred Tax Tax Tax Tax Assets Liabilities Assets Liabilities Other postretirement benefit liabilities ...$ 1,968 Tax over book depreciation...$ 542 Accrual for sales allowances ...654 Lease transactions ...404 Tax loss and tax credit carryforwards...

  • Page 45
    ... market equipment and landscapes products. 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 affiliates." The investment in these companies is reported in the consolidated balance sheet...

  • Page 46
    .... The equipment operations sell a significant portion of their trade receivables to financial services and provide compensation to these operations at approximate market rates of interest. Trade accounts and notes receivable primarily arise from sales of goods to independent dealers. Under...

  • Page 47
    ... Construction and forestry...1,951 Total ...Wholesale notes ...Revolving charge accounts ...Financing leases (direct and sales-type) ...Operating loans ...Total financing receivables ...Less: Unearned finance income: Equipment notes ...Financing leases ...Total ...Allowance for credit losses ...18...

  • Page 48
    ...the allowance for credit losses and investment in financing receivables follows in millions of dollars: Retail Notes 2014 Allowance: Beginning of year balance...$ Provision ...Write-offs ...Recoveries ...Translation adjustments ...End of year balance* ...$ Revolving Charge Accounts Other Total 101...

  • Page 49
    ...nancing receivables outstanding at October 31, 2014 and 2013, respectively. In addition, at October 31, 2014 and 2013, the company's financial services operations had $196 million and $197 million, respectively, of deposits withheld from dealers and merchants available for potential credit losses...

  • Page 50
    ... of commercial paper. The company's carrying values and variable interest related to these conduits were restricted assets (retail notes securitized, allowance for credit losses and other assets) of $1,331 million and $1,274 million at October 31, 2014 and 2013, respectively. The liabilities (short...

  • Page 51
    ...by the restricted assets. Due to the company's short-term credit rating, cash collections from these restricted assets are not required to be placed into a segregated collection account until immediately prior to the time payment is required to the secured creditors. At October 31, 2014, the maximum...

  • Page 52
    ... $60 million related to the sale of the Water operations (see Note 4). Total short-term borrowings ...$ 12,578 $12,898 * Includes unamortized fair value adjustments related to interest rate swaps. The components of other intangible assets are as follows in millions of dollars: Useful Lives* (Years...

  • Page 53
    ...: 2014 Equipment Operations Accounts payable: Trade payables ...$ 1,661 Dividends payable ...210 Other ...208 Accrued expenses: Dealer sales discounts ...1,551 Employee benefits ...1,350 Product warranties ...809 Unearned revenue ...355 Other ...1,374 Total ...Financial Services Accounts payable...

  • Page 54
    ... effect on its financial statements. 23. CAPITAL STOCK Changes in the common stock account in millions were as follows: Number of Shares Issued Balance at October 31, 2011 ...Stock options and other ...Balance at October 31, 2012 ...Stock options and other ...Balance at October 31, 2013 ...Stock...

  • Page 55
    .... Repurchases of the company's common 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: 2014 2013 2012 Net...

  • Page 56
    ... on the market price of a share of underlying common stock excluding dividends. The fair value of the market/service based units at the grant date during 2014, 2013 and 2012 were $116.86, $106.75 and $92.85 per unit, respectively, based on a lattice valuation model excluding dividends. The company...

  • Page 57
    ......10 Health care and life insurance Net actuarial (loss) and prior service (cost) ...(337) Reclassification through amortization of actuarial (gain) loss and prior service (credit) cost to net income:* Actuarial loss ...136 Prior service (credit) ...(15) Net unrealized (loss) on retirement benefits...

  • Page 58
    ... follow: Fair Value* _____ 2014 2013 Property and equipment - net ...$ Goodwill ...Other intangible assets - net ...Other assets...$ Assets held for sale - Water operations ...15 $ $ 16 36 $ 9 53 $ 36 Losses* _____ 2014 2013 2012 $ 44 $ 48 $ 33 * See financing receivables with specific allowances...

  • Page 59
    ... of the valuation methodologies the company uses to measure certain financial instruments on the balance sheet and nonmonetary assets at fair value: Marketable Securities - The portfolio of investments is primarily valued on a market approach (matrix pricing model) in which all significant...

  • Page 60
    ... 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: 2014 Other Assets Designated as hedging instruments: Interest rate contracts ...$ Cross-currency...

  • Page 61
    ... including riding lawn equipment and walk-behind mowers, golf course equipment, utility vehicles, and commercial mowing equipment, along with a broad line of associated implements; integrated agricultural management systems technology and solutions; and other outdoor power products. The construction...

  • Page 62
    ... Capital additions Agriculture and turf...$ Construction and forestry ...Financial services ... 868 $ 145 3 981 $ 1,145 174 228 3 3 Common stock per share sales prices from New York Stock Exchange composite transactions quotations follow: First Quarter 2014 Market price High ...Low ...2013 Market...

  • Page 63
    ... net income per share for the year. * See Note 5 for "Special Items." The company is projecting to close the sale by March 2015. As of October 31, 2014, the Crop Insurance operations had total assets of approximately $725 million consisting primarily of accounts receivable and marketable securities...

  • Page 64
    ... DATA INCOME STATEMENT For the Years Ended October 31, 2014, 2013 and 2012 (In millions of dollars) EQUIPMENT OPERATIONS* 2014 2013 2012 Net Sales and Revenues Net sales ...Finance and interest income ...Other income ...Total ...Costs and Expenses Cost of sales ...Research and development...

  • Page 65
    ... CONSOLIDATING DATA (continued) BALANCE SHEET As of October 31, 2014 and 2013 (In millions of dollars except per share amounts) EQUIPMENT OPERATIONS* 2014 2013 ASSETS Cash and cash equivalents...Marketable securities ...Receivables from unconsolidated subsidiaries and affiliates ...Trade accounts...

  • Page 66
    ...leases ...Proceeds from sales of businesses, net of cash sold ...Cost of receivables acquired (excluding trade and wholesale) ...Purchases of marketable securities ...Purchases of property and equipment ...Cost of equipment on operating leases acquired ...Increase in investment in Financial Services...

  • Page 67
    ...: Equipment operations ...Financial services ...Total Deere & Company stockholders' equity ...3,278 27,422 4,602 4,016 4,210 5,578 434 7,585 8,019 4,559 4,643 19,738 9,063 Total ...24,381 Book value per share* ...$ 26.23 Capital expenditures ...$ 1,004 Number of employees (at year end) ...59...

  • Page 68
    Deere & Company One John Deere Place Moline, Illinois 61265 (309) 765-8000 www.JohnDeere.com