John Deere 2014 Annual Report Download - page 38

38
In May 2014, the company closed the sale of the stock
and certain assets of the entities that compose the company’s
Water operations to FIMI Opportunity Funds. The sale was
the result of the company’s intention to invest its resources in
growing core businesses. At April 30, 2014, the total assets of
$85 million and liabilities of $50 million were classified as held
for sale in the consolidated financial statements, which consisted
of $57 million of trade receivables, $10 million of other
receivables, $49 million of inventories and $5 million of other
assets less a $36 million asset impairment. The related liabilities
held for sale consisted of accounts payable and accrued expenses
of $47 million and retirement benefits and other liabilities of
$3 million. The total amount of proceeds from the sale was
approximately $35 million with a loss recorded in other operating
expenses of $10 million pretax and after-tax in addition to the
impairments recorded (see Note 5). The company provides
certain business services for a fee during a transition period.
In September 2013, the company acquired Bauer Built
Manufacturing Inc., a manufacturer of planters located in
Paton, Iowa, for approximately $84 million. The fair values
assigned to the assets and liabilities related to the acquired entity
were approximately $9 million of receivables, $11 million
of inventories, $25 million of property and equipment, $13
million of goodwill, $26 million of identifiable intangible
assets, $1 million of other assets and $1 million of liabilities.
The identifiable intangibles were primarily related to technology,
a non-compete contract, customer relationships and a trademark,
which have amortization periods with a weighted-average of
seven years. The entity was consolidated and the results of these
operations have been included in the company’s consolidated
financial statements in the agriculture and turf operating segment
since the date of acquisition. The pro forma results of operations
as if the acquisition had occurred at the beginning of 2013 or
comparative fiscal year would not differ significantly from the
reported results.
5. SPECIAL ITEMS
Impairments
In the fourth quarter of 2014, the company recorded non-cash
charges in cost of sales for the impairment of long-lived assets of
$18 million and other assets of $16 million pretax and after-tax.
The assets are part of the company’s agriculture and turf
operations in China. The impairment is the result of a decline
in forecasted financial performance that indicated it was
probable the future cash flows would not cover the carrying
amount of assets used to manufacture agricultural equipment
in that country (see Note 26).
In 2014, the company recorded non-cash charges of
$62 million pretax, or $30 million after-tax, related to the
Water operations. In the first quarter, a $26 million pretax and
after-tax loss was recorded in cost of sales for the impairment
of long-lived assets. In the second quarter, an additional
non-cash charge of $36 million pretax, or $4 million after-tax,
was recorded in other operating expenses for an impairment to
write the Water operations down to fair value less costs to sell.
The tax benefits recognized resulted primarily from a change in
valuation allowances of the Water operations. These operations
were included in the company’s agriculture and turf operating
segment (see Note 26).
In 2013, the company recorded a non-cash charge for
the impairment of long-lived assets of $57 million pretax, or
$51 million after-tax. This consists of $50 million pretax, or
$44 million after-tax, in the third quarter and $7 million pretax
and after-tax in the fourth quarter, related to the company’s
Water operations, which were included in the agriculture and
turf operating segment. The total pretax impairment loss
consisted of $50 million recorded in cost of sales and $7 million
in selling, administrative and general expenses. The impairments
were due to a decline in the forecasted financial performance
and a review of strategic options for the business (see Note 26).
In the fourth quarter of 2013, the company recorded a
non-cash charge of $45 million pretax and after-tax in other
operating expenses for an impairment to write the Landscapes
operations down to realizable value. These operations were
included in the agriculture and turf operating segment and
classified as held for sale at October 31, 2013 (see Note 4).
In the fourth quarter of 2012, the company recorded a
non-cash charge in cost of sales for the impairment of goodwill
of $33 million pretax, or $31 million after-tax, related to the
company’s Water operations. The goodwill impairment in 2012
was due to a decline in the forecasted financial performance
as a result of more complex integration activities. The goodwill
in this reporting unit was completely written off in 2012
(see Note 26).
6. CASH FLOW INFORMATION
For purposes of the statement of consolidated cash flows,
the company considers investments with purchased maturities
of three months or less to be cash equivalents. Substantially all
of the company’s short-term borrowings, excluding the current
maturities of long-term borrowings, mature or may require
payment within three months or less.
The equipment operations sell a significant portion of
their trade receivables to financial services. These intercompany
cash flows are eliminated in the consolidated cash flows.
All cash flows from the changes in trade accounts and
notes receivable (see Note 12) are classified as operating
activities in the statement of consolidated cash flows as these
receivables arise from sales to the company’s customers.
Cash flows from financing receivables that are related to sales
to the company’s customers (see Note 12) are also included in
operating activities. The remaining financing receivables are
related to the financing of equipment sold by independent
dealers and are included in investing activities.
The company had the following non-cash operating and
investing activities that were not included in the statement of
consolidated cash flows. 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
of property and equipment of $128 million, $198 million and
$185 million at October 31, 2014, 2013 and 2012, respectively.