Edgar Filing: DEERE & CO

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended April 30, 2011

Commission file no: 1-4121

DEERE & COMPANY

Delaware
(State of incorporation)

36-2382580
(IRS employer identification no.)

One John Deere Place

Moline, Illinois 61265

(Address of principal executive offices)

Telephone Number: (309) 765-8000

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes X No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes X No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer	X			Accelerated Filer
Non-Accelerated Filer				Smaller Reporting Company

(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes No X

At April 30, 2011, 419,709,211 shares of common stock, $1 par value, of the registrant were outstanding.

Index to Exhibits: Page 46

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

DEERE & COMPANY
STATEMENT OF CONSOLIDATED INCOME
For the Three Months Ended April 30, 2011 and 2010
(In millions of dollars and shares except per share amounts) Unaudited


	2011		2010
Net Sales and Revenues
Net sales	$	8,327.6	$	6,548.2
Finance and interest income	468.5		435.1
Other income	113.6		147.6
Total	8,909.7		7,130.9

Costs and Expenses
Cost of sales	6,106.9		4,765.2
Research and development expenses	298.5		266.0
Selling, administrative and general expenses	828.2		733.3
Interest expense	192.3		207.3
Other operating expenses	143.1		170.2
Total	7,569.0		6,142.0

Income of Consolidated Group before Income Taxes	1,340.7		988.9
Provision for income taxes	438.9		448.4
Income of Consolidated Group	901.8		540.5
Equity in income of unconsolidated affiliates	4.9		9.3
Net Income	906.7		549.8
Less: Net income attributable to noncontrolling interests	2.4		2.3
Net Income Attributable to Deere & Company	$	904.3	$	547.5

Per Share Data
Basic	$	2.15	$	1.29
Diluted	$	2.12	$	1.28

Average Shares Outstanding
Basic	420.7		424.4
Diluted	426.4		429.0

See Condensed Notes to Interim Consolidated Financial Statements.

DEERE & COMPANY
STATEMENT OF CONSOLIDATED INCOME
For the Six Months Ended April 30, 2011 and 2010
(In millions of dollars and shares except per share amounts) Unaudited


	2011		2010
Net Sales and Revenues
Net sales	$	13,841.4	$	10,785.5
Finance and interest income	928.6		902.3
Other income	258.9		277.9
Total	15,028.9		11,965.7

Costs and Expenses
Cost of sales	10,201.0		7,970.7
Research and development expenses	567.4		501.7
Selling, administrative and general expenses	1,493.1		1,375.6
Interest expense	394.8		425.7
Other operating expenses	285.9		338.9
Total	12,942.2		10,612.6

Income of Consolidated Group before Income Taxes	2,086.7		1,353.1
Provision for income taxes	671.0		558.3
Income of Consolidated Group	1,415.7		794.8
Equity in income of unconsolidated affiliates	5.4		.6
Net Income	1,421.1		795.4
Less: Net income attributable to noncontrolling interests	3.0		4.7
Net Income Attributable to Deere & Company	$	1,418.1	$	790.7

Per Share Data
Basic	$	3.36	$	1.86
Diluted	$	3.32	$	1.85

Average Shares Outstanding
Basic	421.3		424.0
Diluted	427.0		428.2

See Condensed Notes to Interim Consolidated Financial Statements.

DEERE & COMPANY
CONDENSED CONSOLIDATED BALANCE SHEET
(In millions of dollars) Unaudited


	April 30			October 31			April 30
	2011			2010			2010
Assets
Cash and cash equivalents	$	3,949.8		$	3,790.6		$	3,614.9
Marketable securities	239.5			227.9			234.2
Receivables from unconsolidated affiliates	45.1			38.8			37.7
Trade accounts and notes receivable - net	4,157.4			3,464.2			4,014.2
Financing receivables - net	18,455.4			17,682.2			15,039.7
Financing receivables securitized - net	2,871.2			2,238.3			3,084.6
Other receivables	828.6			925.6			610.6
Equipment on operating leases - net	1,945.2			1,936.2			1,717.3
Inventories	4,687.0			3,063.0			3,002.9
Property and equipment - net	3,968.5			3,790.7			4,430.4
Investments in unconsolidated affiliates	220.9			244.5			227.0
Goodwill	1,038.7			998.6			1,006.4
Other intangible assets - net	130.7			117.0			129.3
Retirement benefits	200.8			146.7			169.0
Deferred income taxes	2,825.8			2,477.1			2,593.4
Other assets	1,020.9			1,194.0			1,102.5
Assets held for sale				931.4
Total Assets	$	46,585.5		$	43,266.8		$	41,014.1

Liabilities and Stockholders’ Equity
Short-term borrowings	$	7,071.9		$	5,325.7		$	3,195.0
Short-term securitization borrowings	2,821.5			2,208.8			3,065.6
Payables to unconsolidated affiliates	193.5			203.5			151.4
Accounts payable and accrued expenses	6,777.2			6,481.7			5,625.9
Deferred income taxes	162.6			144.3			136.5
Long-term borrowings	16,192.2			16,814.5			17,375.8
Retirement benefits and other liabilities	5,933.0			5,784.9			5,804.5
Total liabilities	39,151.9			36,963.4			35,354.7

Commitments and contingencies (Note 14)

Common stock, $1 par value (issued shares at April 30, 2011 – 536,431,204)	3,211.7			3,106.3			3,058.1
Common stock in treasury	(6,237.5		)	(5,789.5		)	(5,521.5		)
Retained earnings	13,476.3			12,353.1			11,533.4
Accumulated other comprehensive income (loss)	(3,027.2		)	(3,379.6		)	(3,419.1		)
Total Deere & Company stockholders’ equity	7,423.3			6,290.3			5,650.9
Noncontrolling interests	10.3			13.1			8.5
Total stockholders’ equity	7,433.6			6,303.4			5,659.4
Total Liabilities and Stockholders’ Equity	$	46,585.5		$	43,266.8		$	41,014.1

See Condensed Notes to Interim Consolidated Financial Statements.

DEERE & COMPANY

STATEMENT OF CONSOLIDATED CASH FLOWS
For the Six Months Ended April 30, 2011 and 2010
(In millions of dollars) Unaudited

	2011			2010

Cash Flows from Operating Activities
Net income	$	1,421.1		$	795.4
Adjustments to reconcile net income to net cash provided by (used for) operating activities:
Provision for doubtful receivables	13.7			59.3
Provision for depreciation and amortization	448.7			463.4
Share-based compensation expense	33.1			51.7
Undistributed earnings of unconsolidated affiliates	4.1			4.5
Provision (credit) for deferred income taxes	(310.3		)	109.1
Changes in assets and liabilities:
Trade, notes and financing receivables related to sales	(1,228.4		)	(1,220.4		)
Inventories	(1,623.6		)	(754.9		)
Accounts payable and accrued expenses	284.3			458.6
Accrued income taxes payable/receivable	239.5			199.1
Retirement benefits	220.2			(34.5		)
Other	(167.7		)	285.3
Net cash provided by (used for) operating activities	(665.3		)	416.6

Cash Flows from Investing Activities
Collections of receivables (excluding receivables related to sales)	6,664.8			5,889.8
Proceeds from maturities and sales of marketable securities	18.8			9.2
Proceeds from sales of equipment on operating leases	383.4			330.9
Government grants related to property and equipment				21.6
Proceeds from sales of businesses, net of cash sold	893.5			5.8
Cost of receivables (excluding receivables related to sales)	(7,041.7		)	(6,034.9		)
Purchases of marketable securities	(34.0		)	(45.7		)
Purchases of property and equipment	(441.0		)	(311.2		)
Cost of equipment on operating leases acquired	(265.7		)	(208.2		)
Acquisitions of businesses, net of cash acquired	(46.6		)	(41.6		)
Other	(121.0		)	(65.8		)
Net cash provided by (used for) investing activities	10.5			(450.1		)

Cash Flows from Financing Activities
Increase (decrease) in total short-term borrowings	803.2			(77.3		)
Proceeds from long-term borrowings	1,440.6			939.8
Payments of long-term borrowings	(782.1		)	(1,609.2		)
Proceeds from issuance of common stock	160.7			43.5
Repurchases of common stock	(601.2		)	(3.8		)
Dividends paid	(275.0		)	(237.6		)
Excess tax benefits from share-based compensation	64.7			13.7
Other	(24.9		)	(19.9		)
Net cash provided by (used for) financing activities	786.0			(950.8		)

Effect of Exchange Rate Changes on Cash and Cash Equivalents	28.0			(52.5		)

Net Increase (Decrease) in Cash and Cash Equivalents	159.2			(1,036.8		)
Cash and Cash Equivalents at Beginning of Period	3,790.6			4,651.7
Cash and Cash Equivalents at End of Period	$	3,949.8		$	3,614.9

See Condensed Notes to Interim Consolidated Financial Statements.

DEERE & COMPANY

STATEMENT OF CHANGES IN CONSOLIDATED STOCKHOLDERS’ EQUITY

For the Six Months Ended April 30, 2010 and 2011

(In millions of dollars) Unaudited

				Deere & Company Stockholders
	Total Stockholders’ Equity			Comprehensive Income (Loss)			Common Stock		Treasury Stock			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Non- controlling Interests

Balance October 31, 2009	$	4,822.8					$	2,996.2	$	(5,564.7	)	$	10,980.5		$	(3,593.3	)	$	4.1
Net income	795.4			$	790.7							790.7						4.7
Other comprehensive income (loss)
Retirement benefits adjustment	227.0			227.0											227.0
Cumulative translation adjustment	(75.5		)	(75.3		)									(75.3		)	(.2		)
Unrealized gain on derivatives	21.9			21.9											21.9
Unrealized gain on investments	.6			.6											.6
Comprehensive income	969.4			$	964.9													4.5

Repurchases of common stock	(3.8		)						(3.8		)
Treasury shares reissued	47.0								47.0
Dividends declared	(237.7		)									(237.7		)
Stock options and other	61.7						61.9					(.1		)				(.1		)
Balance April 30, 2010	$	5,659.4					$	3,058.1	$	(5,521.5	)	$	11,533.4		$	(3,419.1	)	$	8.5


Balance October 31, 2010	$	6,303.4					$	3,106.3	$	(5,789.5	)	$	12,353.1		$	(3,379.6	)	$	13.1
Net income	1,421.1			$	1,418.1							1,418.1						3.0
Other comprehensive income (loss)
Retirement benefits adjustment	102.3			102.3											102.3
Cumulative translation adjustment	244.1			243.9											243.9			.2
Unrealized gain on derivatives	9.6			9.6											9.6
Unrealized loss on investments	(3.4		)	(3.4		)									(3.4		)
Comprehensive income	1,773.7			$	1,770.5													3.2

Repurchases of common stock	(601.2		)						(601.2		)
Treasury shares reissued	153.2								153.2
Dividends declared	(298.8		)									(294.9		)				(3.9		)
Stock options and other	103.3						105.4											(2.1		)
Balance April 30, 2011	$	7,433.6					$	3,211.7	$	(6,237.5	)	$	13,476.3		$	(3,027.2	)	$	10.3

See Condensed Notes to Interim Consolidated Financial Statements.

Condensed Notes to Interim Consolidated Financial Statements (Unaudited)

(1)	The 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 reflected on the equity basis.

	Financial Services - Includes the Company’s financial services segment, which consists of the previous credit segment and the “Other” segment that was combined at the beginning of the first quarter of 2011. The “Other” segment consisted of an insurance business that did not meet the materiality threshold of reporting. It was previously included as a separate segment in “Financial Services” (see Note 9).

	Consolidated - Represents the consolidation of the equipment operations and financial services. References to “Deere & Company” or “the Company” refer to the entire enterprise.

	Reclassifications

	Certain items previously reported in specific financial statement captions have been reclassified to conform to the 2011 financial statement presentation. Short-term securitization borrowings have been shown separately from other short-term borrowings on the Condensed Consolidated Balance Sheet as a result of the adoption of Financial Accounting Standards Board (FASB) Accounting Standards Update (ASU) No. 2009-17 (see Note 3). In the Supplemental Consolidating Data in Note 21, the costs and collections of trade receivables and wholesale notes for the financial services statement of cash flows investing activities have been presented on a net basis. These receivables have short durations with a high turnover rate. The total cash flows for the financial services investing activities have not changed. The presentation of these receivables on the Statement of Consolidated Cash Flows has also not changed and continues to be shown as an adjustment to net income in the operating activities since they are related to sales.

	Variable Interest Entities

	The Company is the primary beneficiary of and consolidates a supplier that is a variable interest entity (VIE). The Company has both the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE based on a cost sharing supply contract. No additional support beyond what was previously contractually required has been provided during any periods presented. The VIE produces blended fertilizer and other lawn care products for the agriculture and turf segment.

	The assets and liabilities of this supplier VIE consisted of the following in millions of dollars:

		April 30 2011		October 31 2010		April 30 2010
Intercompany receivables		$	19	$	10	$	22
Inventories		52		32		58
Property and equipment - net		4		4		5
Other assets		9		11		7
Total assets		$	84	$	57	$	92

Short-term borrowings		$	3			$	7
Accounts payable and accrued expenses		80		$	55	86
Total liabilities		$	83	$	55	$	93

	The VIE is financed through its own accounts payable and short-term borrowings. The assets of the VIE can only be used to settle the obligations of the VIE. The creditors of the VIE do not have recourse to the general credit of the Company.

	The Company previously consolidated certain wind energy entities that were VIEs, which invested in wind farms that own and operate turbines to generate electrical energy. In December 2010, the Company sold John Deere Renewables, LLC, which included these VIEs and other wind energy entities. No additional support to these VIEs beyond what was previously contractually required was provided during any periods presented.

	The assets and liabilities of these wind energy VIEs consisted of the following in millions of dollars:

		October 31 2010		April 30 2010
	Receivables - net			$	31
	Property and equipment - net			134
	Assets held for sale *	$	133
	Total assets	$	133	$	165

	Intercompany borrowings	$	50	$	52
	Accounts payable and accrued expenses	5		4
	Total liabilities	$	55	$	56

	* See Note 19.

	The VIEs were financed primarily through intercompany borrowings and equity. The VIEs’ assets were pledged as security interests for the intercompany borrowings. The remaining creditors of the VIEs did not have recourse to the general credit of the Company.

	See Note 11 for VIEs related to securitization of financing receivables.

(2)	The consolidated financial statements of Deere & Company have been prepared by the Company, without audit, pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (SEC). Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the U.S. have been condensed or omitted as permitted by such rules and regulations. All adjustments, consisting of normal recurring adjustments, have been included. Management believes that the disclosures are adequate to present fairly the financial position, results of operations and cash flows at the dates and for the periods presented. It is suggested that these interim financial statements be read in conjunction with the financial statements and the notes thereto appearing in the Company’s latest annual report on Form 10-K. Results for interim periods are not necessarily indicative of those to be expected for the fiscal year.

	The preparation of financial statements in conformity with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions that affect the reported amounts and related disclosures. Actual results could differ from those estimates.

	Cash Flow Information

	All cash flows from the changes in trade accounts and notes receivable 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 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 approximately $165 million and $157 million in the first six months of 2011 and 2010, respectively. The Company also had accounts payable related to purchases of property and equipment of approximately $39 million and $36 million at April 30, 2011 and 2010, respectively.

(3)	New accounting standards adopted in the first six months of 2011 were as follows:

	In the first quarter of 2011, the Company adopted FASB ASU No. 2009-16, Accounting for Transfers of Financial Assets, which amends Accounting Standards Codification (ASC) 860, Transfers and Servicing (FASB Statement No. 166, Accounting for Transfers of Financial Assets an amendment of FASB Statement No. 140). This ASU eliminates the qualifying special purpose entities from the consolidation guidance and clarifies the requirements for isolation and limitations on portions of financial assets that are eligible for sale accounting. It requires additional disclosures about the risks from continuing involvement in transferred financial assets accounted for as sales. The adoption did not have a material effect on the Company’s consolidated financial statements.

	In the first quarter of 2011, the Company adopted FASB ASU No. 2009-17, Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities, which amends ASC 810, Consolidation (FASB Statement No. 167, Amendments to FASB Interpretation No. 46(R)). This ASU requires a qualitative analysis to determine the primary beneficiary of a VIE. The analysis identifies the primary beneficiary as the enterprise that has both the power to direct the activities of a VIE that most significantly impact the VIE’s economic performance and the obligation to absorb losses or the right to receive benefits that could be significant to the VIE. The ASU also requires additional disclosures about an enterprise’s involvement in a VIE. The adoption did not have a material effect on the Company’s consolidated financial statements.

	In the first quarter of 2011, the Company adopted FASB ASU No. 2010-20, Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses, which amends ASC 310, Receivables. This ASU requires disclosures related to financing receivables and the allowance for credit losses by portfolio segment. The ASU also requires disclosures of information regarding the credit quality, aging, nonaccrual status and impairments by class of receivable. A portfolio segment is the level at which a creditor develops a systematic methodology for determining its credit allowance. A receivable class is a subdivision of a portfolio segment with similar measurement attributes, risk characteristics and common methods to monitor and assess credit risk. Trade accounts receivable with maturities of one year or less are excluded from the disclosure requirements. The adoption did not have a material effect on the Company’s consolidated financial statements.

	New accounting standards to be adopted are as follows:

	In January 2010, the FASB issued ASU No. 2010-06, Improving Disclosures about Fair Value Measurements, which amends ASC 820, Fair Value Measurements and Disclosures. This ASU requires disclosures of transfers into and out of Levels 1 and 2, more detailed roll forward reconciliations of Level 3 recurring fair value measurements on a gross basis, fair value information by class of assets and liabilities, and descriptions of valuation techniques and inputs for Level 2 and 3 measurements. The effective date was the second quarter of fiscal year 2010 except for the roll forward reconciliations, which are required in the first quarter of fiscal year 2012. The adoption in 2010 did not have a material effect and the future adoption will not have a material effect on the Company’s consolidated financial statements.

	In April 2011, the FASB issued ASU No. 2011-02, A Creditor’s Determination of Whether a Restructuring Is a Troubled Debt Restructuring, which amends ASC 310, Receivables. This ASU states that a troubled debt restructuring occurs when a creditor grants a concession it would not otherwise consider to a debtor that is experiencing financial difficulties. The guidance clarifies what would be considered a concession by the creditor and financial difficulties of the debtor. Certain disclosures are required for transactions that qualify as troubled debt restructurings. The effective date will be the fourth quarter of fiscal year 2011. The adoption will not have a material effect on the Company’s consolidated financial statements.

	In May 2011, the FASB issued ASU No. 2011-04, Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs, which amends ASC 820, Fair Value Measurement. This ASU also requires the categorization by level for items that are only required to be disclosed at fair value and information about transfers between Level 1 and Level 2. In addition, the ASU provides guidance on measuring the fair value of financial instruments managed within a portfolio and the application of premiums and discounts on fair value measurements. The ASU requires additional disclosure for Level 3 measurements regarding the sensitivity of fair value to changes in unobservable inputs and any interrelationships between those inputs. The effective date will be the second quarter of fiscal year 2012. The adoption will not have a material effect on the Company’s consolidated financial statements.

(4)	Total comprehensive income, which includes all changes in the total stockholders’ equity during the period except transactions with stockholders, was as follows in millions of dollars:

		Three Months Ended April 30				Six Months Ended April 30
		2011		2010		2011			2010

	Net income	$	906.7	$	549.8	$	1,421.1		$	795.4
	Other comprehensive income, net of tax:
	Retirement benefits adjustment	36.1		155.2		102.3			227.0
	Cumulative translation adjustment	223.7		34.4		244.1			(75.5		)
	Unrealized gain on derivatives	4.5		15.6		9.6			21.9
	Unrealized gain (loss) on investments	.7		.3		(3.4		)	.6
	Comprehensive income	$	1,171.7	$	755.3	$	1,773.7		$	969.4

	For the second quarter of 2011 and 2010, the table above includes noncontrolling interests’ comprehensive income of $2.6 million and $2.2 million, which consists of net income of $2.4 million and $2.3 million and cumulative translation adjustments of $.2 million and $(.1) million, respectively. For the first six months of 2011 and 2010, the table includes noncontrolling interests’ comprehensive income of $3.2 million and $4.5 million, which consists of net income of $3.0 million and $4.7 million and cumulative translation adjustments of $.2 million and $(.2) million, respectively.

(5)	Dividends declared and paid on a per share basis were as follows:

		Three Months Ended April 30				Six Months Ended April 30
		2011		2010		2011		2010

	Dividends declared	$	.35	$	.28	$	.70	$	.56
	Dividends paid	$	.35	$	.28	$	.65	$	.56

(6)	A reconciliation of basic and diluted net income attributable to Deere & Company per share in millions, except per share amounts, follows:

		Three Months Ended April 30										Six Months Ended April 30
		2011					2010					2011					2010
	Net income attributable to Deere & Company	$	904.3				$	547.5				$	1,418.1				$		790.7
	Less income allocable to participating securities	.3					.2					.6					.3
	Income allocable to common stock	$	904.0				$	547.3				$	1,417.5				$		790.4
	Average shares outstanding	420.7					424.4					421.3					424.0
	Basic per share	$	2.15				$	1.29				$	3.36				$		1.86

	Average shares outstanding	420.7					424.4					421.3					424.0
	Effect of dilutive share-based compensation	5.7					4.6					5.7					4.2
	Total potential shares outstanding	426.4					429.0					427.0					428.2
	Diluted per share	$	2.12				$	1.28				$	3.32				$		1.85

	All shares related to share-based compensation were included in the above diluted per share computation during the second quarter and first six months of 2011. During the second quarter and first six months of 2010, 1.9 million shares in both periods were excluded from the diluted per share computation because the incremental shares under the treasury stock method would have been antidilutive.

(7)	The Company has several defined benefit pension plans covering its U.S. employees and employees in certain foreign countries. The Company also has several defined benefit postretirement health care and life insurance plans for retired employees in the U.S. and Canada.

	The worldwide components of net periodic pension cost consisted of the following in millions of dollars:

				Three Months Ended April 30									Six Months Ended April 30
				2011					2010				2011			2010
	Service cost			$	50				$	43			$	99		$		87
	Interest cost			124					125				248			256
	Expected return on plan assets			(199		)			(191		)		(398		)	(381				)
	Amortization of actuarial loss			35					30				73			59
	Amortization of prior service cost			11					11				21			21
	Settlements/curtailments								2							3
	Net cost			$	21				$	20			$	43		$		45

	The worldwide components of net periodic postretirement benefits cost (health care and life insurance) consisted of the following in millions of dollars:

		Three Months Ended April 30						Six Months Ended April 30
		2011			2010			2011			2010
	Service cost	$	11		$	10		$	22		$	22
	Interest cost	82			83			163			168
	Expected return on plan assets	(29		)	(31		)	(57		)	(61		)
	Amortization of actuarial loss	68			71			135			155
	Amortization of prior service credit	(3		)	(3		)	(7		)	(7		)
	Net cost	$	129		$	130		$	256		$	277

	During the first six months of 2011, the Company contributed approximately $35 million to its pension plans and $24 million to its other postretirement benefit plans. The Company presently anticipates contributing an additional $47 million to its pension plans and $9 million to its other postretirement benefit plans in the remainder of fiscal year 2011. These contributions include payments from Company funds to either increase plan assets or make direct payments to plan participants.

(8)	The Company’s unrecognized tax benefits at April 30, 2011 were $228 million, compared to $218 million at October 31, 2010. The liability at April 30, 2011 consisted of approximately $73 million, which would affect the effective tax rate if it was recognized. The remaining liability was related to tax positions for which there are offsetting tax receivables, or the uncertainty was only related to timing. The changes in the unrecognized tax benefits in the first six months of 2011 were not significant. The Company expects that any reasonably possible change in the amounts of unrecognized tax benefits in the next twelve months would not be significant.

	The Patient Protection and Affordable Care Act as amended by the Healthcare and Education Reconciliation Act of 2010 was signed into law in the Company’s second fiscal quarter of 2010. Under the legislation, to the extent the Company’s future health care drug expenses are reimbursed under the Medicare Part D retiree drug subsidy (RDS) program, the expenses will no longer be tax deductible effective November 1, 2013. Since the tax effects for the retiree health care liabilities are reflected in the Company’s financial statements, the entire impact of this tax change relating to the future retiree drug costs was recorded in tax expense in the period in which the legislation was enacted. As a result of the legislation, the Company’s tax expenses were approximately $130 million higher in the second quarter of 2010.

(9)	Worldwide net sales and revenues, operating profit and identifiable assets by segment in millions of dollars follow:

	Three Months Ended April 30							Six Months Ended April 30
	2011			2010			% Change	2011			2010			% Change
Net sales and revenues:
Agriculture and turf	$	6,999		$	5,637		+24	$	11,369		$	9,245		+23
Construction and forestry	1,329			911			+46	2,472			1,540			+61
Total net sales	8,328			6,548			+27	13,841			10,785			+28
Financial services *	491			499			-2	998			1,005			-1
Other revenues	91			84			+8	190			176			+8
Total net sales and revenues	$	8,910		$	7,131		+25	$	15,029		$	11,966		+26
Operating profit (loss): **
Agriculture and turf	$	1,163		$	952		+22	$	1,720		$	1,304		+32
Construction and forestry	105			36			+192	194			(1		)
Financial services *	163			110			+48	335			212			+58
Total operating profit	1,431			1,098			+30	2,249			1,515			+48
Other reconciling items ***	(527		)	(551		)	-4	(831		)	(724		)	+15
Net income attributable to Deere & Company	$	904		$	547		+65	$	1,418		$	791		+79

Identifiable assets:
Agriculture and turf								$	9,331		$	7,136		+31
Construction and forestry								2,654			2,113			+26
Financial services *								28,631			26,223			+9
Corporate								5,970			5,542			+8
Total assets								$	46,586		$	41,014		+14

Intersegment sales and revenues:
Agriculture and turf net sales	$	26		$	12		+117	$	45		$	26		+73
Construction and forestry net sales	9			3			+200	11			3			+267
Financial services *	58			58				107			111			-4

Equipment operations outside the U.S. and Canada:
Net sales	$	3,403		$	2,341		+45	$	5,496		$	4,052		+36
Operating profit	334			207			+61	548			325			+69

*	At the beginning of the first quarter of 2011, the Company combined the reporting of the credit segment and the “Other” segment into the financial services segment. The “Other” segment consisted of an insurance business related to extended warranty policies that did not meet the materiality threshold of reporting. The revenues, intersegment revenues, operating profit and identifiable assets for previous periods were revised as shown above or as follows:

		Third Quarter	Years
		2010	2010	2009
	Financial Services
	Revenues	$ 528	$ 2,073	$ 2,029
	Intersegment revenues	62	224	255
	Operating profit	148	499	242
	Identifiable assets	26,707	27,507	25,964

**	Operating profit (loss) is income from continuing operations before corporate expenses, certain external interest expense, certain foreign exchange gains and losses and income taxes. Operating profit of the financial services segment includes the effect of interest expense and foreign exchange gains and losses.

***	Other reconciling items are primarily corporate expenses, certain external interest expense, certain foreign exchange gains and losses, income taxes and net income attributable to noncontrolling interests.

(10)	Past due balances of financing receivables represent the total balance held (principal plus accrued interest) with any payment amounts 30 days or more past the contractual payment due date. Non-performing financing receivables represent loans for which the Company has ceased accruing finance income. These receivables are generally 120 days delinquent and the estimated uncollectible amount, after charging the dealer’s withholding account, has been written off to the allowance for credit losses. Finance income for non-performing receivables is recognized on a cash basis. Accrual of finance income is resumed when the receivable becomes contractually current and collections are reasonably assured.

	An age analysis of past due and non-performing financing receivables in millions of dollars follows:

	April 30, 2011
	30-59 Days Past Due		60-89 Days Past Due		90 Days or Greater Past Due *		Total Past Due
Retail Notes:
Agriculture and turf	$	79	$	37	$	29	$	145
Construction and forestry	56		26		16		98
Other:
Agriculture and turf	23		12		24		59
Construction and forestry	14		5		7		26
Total	$	172	$	80	$	76	$	328

* Financing receivables that are 90 days or greater past due and still accruing finance income.

	Total Past Due		Total Non- Performing		Current		Total Financing Receivables
Retail Notes:
Agriculture and turf	$	145	$	152	$	13,416	$	13,713
Construction and forestry	98		29		1,182		1,309
Recreational products					7		7
Other:
Agriculture and turf	59		16		5,472		5,547
Construction and forestry	26		13		933		972
Total	$	328	$	210	$	21,010	21,548
Less allowance for doubtful receivables							221
Total financing receivables - net							$	21,327

An analysis of the allowance for doubtful financing receivables and investment in financing receivables in millions of dollars follows:

	Three Months Ended
	April 30, 2011
	Retail Notes			Revolving Charge Accounts			Other			Total
Allowance:
Balance, beginning of period	$	136		$	45		$	36		$	217
Provision	4			2			(2		)	4
Write-offs	(4		)	(9		)	(1		)	(14		)
Recoveries	4			6						10
Other changes *	3						1			4
Balance, end of period	$	143		$	44		$	34		$	221

	Six Months Ended
	April 30, 2011
Allowance:
Balance, beginning of period	$	144		$	44		$	37		$	225
Provision	8			5			(1		)	12
Write-offs	(21		)	(19		)	(3		)	(43		)
Recoveries	7			14						21
Other changes *	5						1			6
Balance, end of period	$	143		$	44		$	34		$	221

Balance individually evaluated	$	3		$			$	3		$	6
Balance collectively evaluated	$	140		$	44		$	31		$	215

Financing receivables:
Balance	$	15,029		$	2,287		$	4,232		$	21,548
Balance individually evaluated	$	23		$	2		$	10		$	35
Balance collectively evaluated	$	15,006		$	2,285		$	4,222		$	21,513

* Primarily translation adjustments.

Financing receivables are considered impaired when it is probable the Company will be unable to collect all amounts due according to the contractual terms. Receivables reviewed for impairment generally include those that are either past due, or have provided bankruptcy notification, or require significant collection efforts. Receivables, which are impaired, are classified as non-performing.

An analysis of the impaired financing receivables in millions of dollars follows:

	April 30, 2011
	Recorded Investment		Unpaid Principal Balance		Specific Allowance		Average Recorded Investment
Receivables with specific allowance: *
Retail notes	$	5	$	5	$	2	$	5
Revolving charge accounts
Operating loans	3		3		2		4
Wholesale notes	1		1		1		1
Financing leases	1		1		1		1
Total	10		10		6		11

Receivables without a specific allowance:
Retail notes	11		11				10
Total	$	21	$	21	$	6	$	21
Agriculture and turf	$	12	$	12	$	4	$	12
Construction and forestry	$	9	$	9	$	2	$	9

* Finance income recognized was not material.

(11) Securitization of financing receivables:

The Company, as a part of its overall funding strategy, periodically transfers certain financing receivables (retail notes) into variable interest entities (VIEs) that are special purpose entities (SPEs), or a non-VIE banking operation, as part of its asset-backed securities programs (securitizations). The structure of these transactions is such that the transfer of the retail notes does not meet the criteria of sales of receivables, and is, therefore, accounted for as a secured borrowing. SPEs utilized in securitizations of retail notes differ from other entities included in the Company’s consolidated statements because the assets they hold are legally isolated. Use of the assets held by the SPEs or the non-VIE is restricted by terms of the documents governing the securitization transactions.

In securitizations of retail notes related to secured borrowings, the retail notes are transferred to certain SPEs or to a non-VIE banking operation, which in turn issue debt to investors. The resulting secured borrowings are recorded as “Short-term securitization borrowings” on the balance sheet. The securitized retail notes are recorded as “Financing receivables securitized – net” on the balance sheet. The total restricted assets on the balance sheet related to these securitizations include the financing receivables securitized less an allowance for credit losses, and other assets primarily representing restricted cash. For those securitizations in which retail notes are transferred into SPEs, the SPEs supporting the secured borrowings are consolidated unless the Company does not have both the power to direct the activities that most significantly impact the SPEs’ economic performance and the obligation to absorb losses or the right

to receive benefits that could potentially be significant to the SPEs. No additional support to these SPEs beyond what was previously contractually required has been provided during the reporting periods.

In certain securitizations, the Company consolidates the SPEs since it has both the power to direct the activities that most significantly impact the SPEs’ economic performance through its role as servicer of all the receivables held by the SPEs, and the obligation through variable interests in the SPEs to absorb losses or receive benefits that could potentially be significant to the SPEs. The restricted assets (retail notes, allowance for credit losses and other assets) of the consolidated SPEs totaled $2,027 million, $1,739 million and $2,207 million at April 30, 2011, October 31, 2010 and April 30, 2010, respectively. The liabilities (short-term securitization borrowings and accrued interest) of these SPEs totaled $1,941 million, $1,654 million and $2,143 million at April 30, 2011, October 31, 2010 and April 30, 2010 respectively. The credit holders of these SPEs do not have legal recourse to the Company’s general credit.

In certain securitizations, the Company transfers retail notes to a non-VIE bank operation, which is not consolidated since the Company does not have a controlling interest in the entity. The Company’s carrying values and interests related to the securitizations with the unconsolidated non-VIE were restricted assets (retail notes, allowance for credit losses and other assets) of $234 million and liabilities (short-term securitization borrowings and accrued interest) of $221 million at April 30, 2011.

In certain securitizations, the Company transfers retail notes into bank-sponsored, multi-seller, commercial paper conduits, which are SPEs that are not consolidated. The Company does not service a significant portion of the conduits’ receivables, and, therefore, does not have the power to direct the activities that most significantly impact the conduits’ economic performance. These conduits provide a funding source to the Company (as well as other transferors into the conduit) as they fund the retail notes through the issuance of commercial paper. The Company’s carrying values and variable interests related to these conduits were restricted assets (retail notes, allowance for credit losses and other assets) of $700 million, $589 million and $988 million at April 30, 2011, October 31, 2010 and April 30, 2010, respectively. The liabilities (short-term securitization borrowings and accrued interest) related to these conduits were $661 million, $557 million and $925 million at April 30, 2011, October 31, 2010 and April 30, 2010, respectively.

The Company’s carrying amount of the liabilities to the unconsolidated conduits, compared to the maximum exposure to loss related to these conduits, which would only be incurred in the event of a complete loss on the restricted assets, was as follows in millions of dollars:

	April 30, 2011
Carrying value of liabilities	$	661
Maximum exposure to loss