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 July 31, 2013

Commission file no: 1-4121

DEERE & COMPANY

(Exact name of registrant as specified in its charter)

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

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

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

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

At July 31, 2013, 382,845,951 shares of common stock, $1 par value, of the registrant were outstanding.

Index to Exhibits: Page 51

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

DEERE & COMPANY
STATEMENT OF CONSOLIDATED INCOME
For the Three Months Ended July 31, 2013 and 2012
(In millions of dollars and shares except per share amounts) Unaudited

	2013		2012

Net Sales and Revenues
Net sales	$	9,315.6	$	8,930.3
Finance and interest income	530.9		493.2
Other income	163.4		166.9
Total	10,009.9		9,590.4

Costs and Expenses
Cost of sales	6,837.9		6,756.0
Research and development expenses	338.7		367.8
Selling, administrative and general expenses	919.8		878.4
Interest expense	182.6		194.9
Other operating expenses	181.6		178.6
Total	8,460.6		8,375.7

Income of Consolidated Group before Income Taxes	1,549.3		1,214.7
Provision for income taxes	553.5		426.8
Income of Consolidated Group	995.8		787.9
Equity in income of unconsolidated affiliates	.8		2.3
Net Income	996.6		790.2
Less: Net income attributable to noncontrolling interests	.1		2.2
Net Income Attributable to Deere & Company	$	996.5	$	788.0

Per Share Data
Basic	$	2.58	$	2.00
Diluted	$	2.56	$	1.98

Average Shares Outstanding
Basic	386.0		394.7
Diluted	389.6		398.8

See Condensed Notes to Interim Consolidated Financial Statements.

DEERE & COMPANY
STATEMENT OF CONSOLIDATED COMPREHENSIVE INCOME
For the Three Months Ended July 31, 2013 and 2012
(In millions of dollars) Unaudited

	2013			2012

Net Income	$	996.6		$	790.2

Other Comprehensive Income (Loss), Net of Income Taxes
Retirement benefits adjustment	67.2			52.7
Cumulative translation adjustment	(103.4		)	(191.8		)
Unrealized gain (loss) on derivatives	4.0			(3.6		)
Unrealized gain (loss) on investments	(12.6		)	2.2
Other Comprehensive Loss, Net of Income Taxes	(44.8		)	(140.5		)

Comprehensive Income of Consolidated Group	951.8			649.7
Less: Comprehensive income attributable to noncontrolling interests	.1			2.0
Comprehensive Income Attributable to Deere & Company	$	951.7		$	647.7

See Condensed Notes to Interim Consolidated Financial Statements.

DEERE & COMPANY
STATEMENT OF CONSOLIDATED INCOME
For the Nine Months Ended July 31, 2013 and 2012
(In millions of dollars and shares except per share amounts) Unaudited

	2013		2012

Net Sales and Revenues
Net sales	$	26,373.5	$	24,453.9
Finance and interest income	1,544.0		1,452.2
Other income	427.4		459.4
Total	28,344.9		26,365.5

Costs and Expenses
Cost of sales	19,334.9		18,166.4
Research and development expenses	1,072.1		1,032.3
Selling, administrative and general expenses	2,657.7		2,468.8
Interest expense	553.7		582.8
Other operating expenses	487.3		503.2
Total	24,105.7		22,753.5

Income of Consolidated Group before Income Taxes	4,239.2		3,612.0
Provision for income taxes	1,508.8		1,234.1
Income of Consolidated Group	2,730.4		2,377.9
Equity in income of unconsolidated affiliates	.2		4.8
Net Income	2,730.6		2,382.7
Less: Net income attributable to noncontrolling interests	.1		5.6
Net Income Attributable to Deere & Company	$	2,730.5	$	2,377.1

Per Share Data
Basic	$	7.04	$	5.95
Diluted	$	6.97	$	5.88

Average Shares Outstanding
Basic	387.7		399.6
Diluted	391.7		404.0

See Condensed Notes to Interim Consolidated Financial Statements.

DEERE & COMPANY
STATEMENT OF CONSOLIDATED COMPREHENSIVE INCOME
For the Nine Months Ended July 31, 2013 and 2012
(In millions of dollars) Unaudited

	2013			2012

Net Income	$	2,730.6		$	2,382.7

Other Comprehensive Income (Loss), Net of Income Taxes
Retirement benefits adjustment	218.3			234.4
Cumulative translation adjustment	(143.0		)	(371.6		)
Unrealized gain (loss) on derivatives	9.8			(5.4		)
Unrealized gain (loss) on investments	(12.4		)	5.6
Other Comprehensive Income (Loss), Net of Income Taxes	72.7			(137.0		)

Comprehensive Income of Consolidated Group	2,803.3			2,245.7
Less: Comprehensive income attributable to noncontrolling interests	.1			5.2
Comprehensive Income Attributable to Deere & Company	$	2,803.2		$	2,240.5

See Condensed Notes to Interim Consolidated Financial Statements.

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

	July 31			October 31			July 31
	2013			2012			2012
Assets
Cash and cash equivalents	$	3,090.3		$	4,652.2		$	3,397.5
Marketable securities	1,706.0			1,470.4			1,545.7
Receivables from unconsolidated affiliates	26.0			59.7			70.8
Trade accounts and notes receivable - net	4,865.8			3,799.1			4,572.2
Financing receivables - net	24,183.1			22,159.1			20,685.3
Financing receivables securitized - net	3,890.5			3,617.6			3,163.6
Other receivables	1,031.5			1,790.9			1,309.2
Equipment on operating leases - net	2,826.0			2,527.8			2,249.7
Inventories	5,594.3			5,170.0			5,867.5
Property and equipment - net	5,107.6			5,011.9			4,463.4
Investments in unconsolidated affiliates	214.2			215.0			217.8
Goodwill	924.2			921.2			933.6
Other intangible assets - net	81.2			105.0			107.8
Retirement benefits	31.3			20.2			38.8
Deferred income taxes	3,468.1			3,280.4			3,029.1
Other assets	1,296.8			1,465.3			1,546.6
Total Assets	$	58,336.9		$	56,265.8		$	53,198.6

Liabilities and Stockholders’ Equity
Short-term borrowings	$	8,213.0		$	6,392.5		$	7,041.0
Short-term securitization borrowings	3,780.1			3,574.8			3,028.0
Payables to unconsolidated affiliates	80.5			135.2			103.5
Accounts payable and accrued expenses	8,306.3			8,988.9			8,069.4
Deferred income taxes	155.5			164.4			162.7
Long-term borrowings	21,698.7			22,453.1			21,157.2
Retirement benefits and other liabilities	7,511.2			7,694.9			6,222.2
Total liabilities	49,745.3			49,403.8			45,784.0

Commitments and contingencies (Note 14)

Common stock, $1 par value (issued shares at July 31, 2013 – 536,431,204)	3,498.7			3,352.2			3,320.1
Common stock in treasury	(9,441.6		)	(8,813.8		)	(8,476.2		)
Retained earnings	19,031.5			16,875.2			16,366.5
Accumulated other comprehensive income (loss)	(4,498.8		)	(4,571.5		)	(3,814.6		)
Total Deere & Company stockholders’ equity	8,589.8			6,842.1			7,395.8
Noncontrolling interests	1.8			19.9			18.8
Total stockholders’ equity	8,591.6			6,862.0			7,414.6
Total Liabilities and Stockholders’ Equity	$	58,336.9		$	56,265.8		$	53,198.6

See Condensed Notes to Interim Consolidated Financial Statements.

DEERE & COMPANY
STATEMENT OF CONSOLIDATED CASH FLOWS
For the Nine Months Ended July 31, 2013 and 2012
(In millions of dollars) Unaudited

	2013			2012

Cash Flows from Operating Activities
Net income	$	2,730.6		$	2,382.7
Adjustments to reconcile net income to net cash provided by (used for) operating activities:
Provision for credit losses	14.0			6.1
Provision for depreciation and amortization	841.2			742.7
Impairment charges	50.4
Share-based compensation expense	62.7			56.1
Undistributed earnings of unconsolidated affiliates	7.8			(7.3		)
Credit for deferred income taxes	(197.2		)	(205.3		)
Changes in assets and liabilities:
Trade, notes and financing receivables related to sales	(2,240.5		)	(2,040.9		)
Insurance receivables	488.1			(175.1		)
Inventories	(954.2		)	(2,032.2		)
Accounts payable and accrued expenses	(408.6		)	397.6
Accrued income taxes payable/receivable	186.0			100.4
Retirement benefits	141.7			(70.1		)
Other	(134.2		)	(290.1		)
Net cash provided by (used for) operating activities	587.8			(1,135.4		)

Cash Flows from Investing Activities
Collections of receivables (excluding receivables related to sales)	10,807.9			9,875.4
Proceeds from maturities and sales of marketable securities	636.7			125.8
Proceeds from sales of equipment on operating leases	692.3			583.1
Proceeds from sales of businesses, net of cash sold	22.0			30.4
Cost of receivables acquired (excluding receivables related to sales)	(12,404.6		)	(10,832.3		)
Purchases of marketable securities	(899.7		)	(882.7		)
Purchases of property and equipment	(795.1		)	(808.4		)
Cost of equipment on operating leases acquired	(834.8		)	(512.3		)
Other	(127.7		)	5.7
Net cash used for investing activities	(2,903.0		)	(2,415.3		)

Cash Flows from Financing Activities
Increase in total short-term borrowings	2,012.9			1,235.4
Proceeds from long-term borrowings	3,772.7			8,256.2
Payments of long-term borrowings	(3,899.6		)	(4,396.8		)
Proceeds from issuance of common stock	162.4			37.1
Repurchases of common stock	(751.9		)	(1,225.3		)
Dividends paid	(556.3		)	(516.3		)
Excess tax benefits from share-based compensation	46.5			16.8
Other	(40.6		)	(53.0		)
Net cash provided by financing activities	746.1			3,354.1

Effect of Exchange Rate Changes on Cash and Cash Equivalents	7.2			(53.1		)

Net Decrease in Cash and Cash Equivalents	(1,561.9		)	(249.7		)
Cash and Cash Equivalents at Beginning of Period	4,652.2			3,647.2
Cash and Cash Equivalents at End of Period	$	3,090.3		$	3,397.5

See Condensed Notes to Interim Consolidated Financial Statements.

DEERE & COMPANY

STATEMENT OF CHANGES IN CONSOLIDATED STOCKHOLDERS’ EQUITY

For the Nine Months Ended July 31, 2012 and 2013

(In millions of dollars) Unaudited

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

Balance October 31, 2011	$	6,814.9		$	3,251.7	$	(7,292.8	)	$	14,519.4		$	(3,678.0	)	$	14.6
Net income	2,382.7								2,377.1						5.6
Other comprehensive loss	(137.0		)									(136.6		)	(.4		)
Repurchases of common stock	(1,225.3		)			(1,225.3		)
Treasury shares reissued	41.9					41.9
Dividends declared	(531.2		)						(530.2		)				(1.0		)
Stock options and other	68.6			68.4					.2
Balance July 31, 2012	$	7,414.6		$	3,320.1	$	(8,476.2	)	$	16,366.5		$	(3,814.6	)	$	18.8




Balance October 31, 2012	$	6,862.0		$	3,352.2	$	(8,813.8	)	$	16,875.2		$	(4,571.5	)	$	19.9
Net income	2,730.6								2,730.5						.1
Other comprehensive income	72.7											72.7
Repurchases of common stock	(751.9		)			(751.9		)
Treasury shares reissued	124.1					124.1
Dividends declared	(581.8		)						(574.1		)				(7.7		)
Deconsolidation of variable interest entity	(10.6		)												(10.6		)
Stock options and other	146.5			146.5					(.1		)				.1
Balance July 31, 2013	$	8,591.6		$	3,498.7	$	(9,441.6	)	$	19,031.5		$	(4,498.8	)	$	1.8

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 primarily the Company’s financing operations.

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

Variable Interest Entities

The Company was the primary beneficiary of and consolidated a supplier that was a variable interest entity (VIE). The Company had both the power to direct the activities of the VIE that most significantly impacted 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. In the first quarter of 2013, the entity was deconsolidated since the previous conditions for consolidation no longer existed. The Company no longer has a variable interest in the supplier and no related parties were involved in the deconsolidation. The effect on the financial statements for the deconsolidation was a decrease in assets, liabilities and noncontrolling interests of approximately $26 million, $15 million and $11 million, respectively, with no gain or loss. No additional support beyond what was previously contractually required was provided during any periods presented in the financial statements. The VIE produced blended fertilizer and other lawn care products for the agriculture and turf segment.

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

	October 31 2012		July 31 2012
Cash and cash equivalents	$	26	$	29
Intercompany receivables	7		13
Inventories	25		45
Property and equipment - net	2		3
Other assets	5		5
Total assets	$	65	$	95

Short-term borrowings	$	5	$	3
Accounts payable and accrued expenses	48		81
Total liabilities	$	53	$	84

The VIE was financed through its own accounts payable and short-term borrowings. The assets of the VIE could only be used to settle the obligations of the VIE. The creditors of the VIE 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 and consolidated subsidiaries 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 consolidated 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 $408 million and $341 million in the first nine months of 2013 and 2012, respectively. The Company also had accounts payable related to purchases of property and equipment of approximately $74 million and $53 million at July 31, 2013 and 2012, respectively.

(3) New accounting standards adopted in the first nine months of 2013 were as follows:

In the first quarter of 2013, the Company adopted Financial Accounting Standards Board (FASB) Accounting Standards Update (ASU) No. 2011-05, Presentation of Comprehensive Income, which amends Accounting Standards Codification (ASC) 220, Comprehensive Income. This ASU requires the presentation of total comprehensive income, total net income and the components of net income and comprehensive income either in a single continuous statement or in two separate but consecutive statements. The Company has presented two separate but consecutive statements with the tax effects for other comprehensive income items disclosed in the notes. The requirements do not change how earnings per share is calculated or presented. The adoption did not have a material effect on the Company’s consolidated financial statements.

In the first quarter of 2013, the Company adopted FASB ASU No. 2011-08, Testing Goodwill for Impairment, which amends ASC 350, Intangibles – Goodwill and Other. This ASU gives an entity the option to first assess qualitative factors to determine if goodwill is impaired. The entity may first determine based on qualitative factors if it is more likely than not that the fair value of a reporting unit is less than its carrying amount, including goodwill. If that assessment indicates no impairment, the first and second steps of the quantitative goodwill impairment test are not required. The adoption did not have a material effect on the Company’s consolidated financial statements.

In the first quarter of 2013, the Company adopted FASB ASU No. 2012-02, Testing Indefinite-Lived Intangible Assets for Impairment, which amends ASC 350, Intangibles – Goodwill and Other. This ASU gives an entity the option to first assess qualitative factors to determine if indefinite-lived intangible assets are impaired. The entity may first determine based on qualitative factors if it is more likely than not that the fair value of indefinite-lived intangible assets are less than their carrying amount. If that assessment indicates no impairment, the quantitative impairment test is not required. 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 December 2011, the FASB issued ASU No. 2011-11, Disclosures about Offsetting Assets and Liabilities, which amends ASC 210, Balance Sheet. This ASU requires entities to disclose gross and net information about both instruments and transactions eligible for offset in the statement of financial position and those subject to an agreement similar to a master netting arrangement. This would include derivatives and other financial securities arrangements. The effective date will be the first quarter of fiscal year 2014 and must be applied retrospectively. The adoption will not have a material effect on the Company’s consolidated financial statements.

In February 2013, the FASB issued ASU No. 2013-02, Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income, which amends ASC 220, Comprehensive Income. This ASU requires the disclosure of amounts reclassified out of accumulated other comprehensive income by component and by net income line item. The disclosure may be provided either parenthetically on the face of the financial statements or in the notes. The effective date will be the first quarter of fiscal year 2014 and must be applied prospectively. The adoption will not have a material effect on the Company’s consolidated financial statements.

(4) Other comprehensive income items are transactions recorded in stockholders’ equity during the year, excluding net income and transactions with stockholders. The items included in other comprehensive income (loss) and the related tax effects in millions of dollars follow:

Three Months Ended July 31, 2013	Before Tax Amount			Tax (Expense) Credit			After Tax Amount
Net unrealized gain on retirement benefits adjustment	$	106.6		$	(39.4	)	$	67.2
Cumulative translation adjustment	(103.5		)	.1			(103.4		)
Net unrealized gain on derivatives	6.2			(2.2		)	4.0
Net unrealized loss on investments	(19.3		)	6.7			(12.6		)
Total other comprehensive loss	$	(10.0	)	$	(34.8	)	$	(44.8	)

Three Months Ended July 31, 2012	Before Tax Amount			Tax (Expense) Credit			After Tax Amount
Net unrealized gain on retirement benefits adjustment	$	86.3		$	(33.6	)	$	52.7
Cumulative translation adjustment	(198.2		)	6.4			(191.8		)
Net unrealized loss on derivatives	(5.7		)	2.1			(3.6		)
Net unrealized gain on investments	3.4			(1.2		)	2.2
Total other comprehensive loss	$	(114.2	)	$	(26.3	)	$	(140.5	)

For the third quarter of 2013 and 2012, the noncontrolling interests’ comprehensive income was $.1 million and $2.0 million, respectively, which consisted of net income of $.1 million in 2013 and $2.2 million in 2012 and cumulative translation adjustments of none in 2013 and $(.2) million in 2012.

Nine Months Ended July 31, 2013	Before Tax Amount			Tax (Expense) Credit			After Tax Amount
Net unrealized gain on retirement benefits adjustment	$	345.6		$	(127.3	)	$	218.3
Cumulative translation adjustment	(148.7		)	5.7			(143.0		)
Net unrealized gain on derivatives	14.9			(5.1		)	9.8
Net unrealized loss on investments	(19.1		)	6.7			(12.4		)
Total other comprehensive income	$	192.7		$	(120.0	)	$	72.7

Nine Months Ended July 31, 2012	Before Tax Amount			Tax (Expense) Credit			After Tax Amount
Net unrealized gain on retirement benefits adjustment	$	378.7		$	(144.3	)	$	234.4
Cumulative translation adjustment	(382.8		)	11.2			(371.6		)
Net unrealized loss on derivatives	(8.3		)	2.9			(5.4		)
Net unrealized gain on investments	8.6			(3.0		)	5.6
Total other comprehensive loss	$	(3.8	)	$	(133.2	)	$	(137.0	)

For the first nine months of 2013 and 2012, the table includes noncontrolling interests’ comprehensive income of $.1 million and $5.2 million, respectively, which consisted of net income of $.1 million in 2013 and $5.6 million in 2012 and cumulative translation adjustments of none in 2013 and $(.4) million in 2012.

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

	Three Months Ended July 31				Nine Months Ended July 31
	2013		2012		2013		2012

Dividends declared	$	.51	$	.46	$	1.48	$	1.33
Dividends paid	$	.51	$	.46	$	1.43	$	1.28

(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 July 31				Nine Months Ended July 31
	2013		2012		2013		2012
Net income attributable to Deere & Company	$	996.5	$	788.0	$	2,730.5	$	2,377.1
Less income allocable to participating securities	.2		.2		.8		.7
Income allocable to common stock	$	996.3	$	787.8	$	2,729.7	$	2,376.4
Average shares outstanding	386.0		394.7		387.7		399.6
Basic per share	$	2.58	$	2.00	$	7.04	$	5.95

Average shares outstanding	386.0		394.7		387.7		399.6
Effect of dilutive share-based compensation	3.6		4.1		4.0		4.4
Total potential shares outstanding	389.6		398.8		391.7		404.0
Diluted per share	$	2.56	$	1.98	$	6.97	$	5.88

During the third quarter and first nine months of 2013, 2.5 million shares related to share-based compensation were excluded from the above diluted per share computation because the incremental shares under the treasury stock method would have been antidilutive. During the third quarter and first nine months of 2012, 6.4 million shares were excluded from the diluted per share computation.

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

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

	Three Months Ended July 31						Nine Months Ended July 31
	2013			2012			2013			2012
Service cost	$	68		$	55		$	204		$	164
Interest cost	107			116			329			349
Expected return on plan assets	(193		)	(197		)	(583		)	(590		)
Amortization of actuarial loss	66			49			194			149
Amortization of prior service cost	9			10			25			31
Settlements/curtailments				1			1			3
Net cost	$	57		$	34		$	170		$	106

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 July 31						Nine Months Ended July 31
	2013			2012			2013			2012
Service cost	$	14		$	12		$	43		$	35
Interest cost	64			70			191			210
Expected return on plan assets	(21		)	(25		)	(63		)	(75		)
Amortization of actuarial loss	35			45			105			105
Amortization of prior service credit	(2		)	(3		)	(4		)	(11		)
Net cost	$	90		$	99		$	272		$	264

For fiscal year 2012, the participants in one of the Company’s postretirement health care plans became “almost all” inactive as described by the applicable accounting standards due to additional retirements. As a result, beginning in 2012, the net actuarial loss for this plan in the table above was amortized over the longer period for the average remaining life expectancy of the inactive participants rather than the average remaining service period of the active participants.

During the first nine months of 2013, the Company contributed approximately $267 million to its pension plans and $19 million to its other postretirement benefit plans. The Company presently anticipates contributing an additional $20 million to its pension plans and $9 million to its other postretirement benefit plans in the remainder of fiscal year 2013. 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 July 31, 2013 were $259 million, compared to $265 million at October 31, 2012. The liability at July 31, 2013 consisted of approximately $58 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 nine months of 2013 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.

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 Company increased flexibility and efficiency in funding growth in international operations. As a result, the tax status of these operations has changed. Formerly, as a branch these earnings were taxable in the U.S. as earned. As a subsidiary, these earnings will now be taxable in the U.S. if they are distributed to Deere & Company as dividends, which is the same as the Company’s other foreign subsidiaries. The earnings of the new German subsidiary remain taxable in Germany. Due to the change in tax status and the expectation that the German subsidiary’s earnings are indefinitely reinvested, the deferred tax assets and liabilities related to U.S. taxable temporary differences for the previous German branch were written off. The effect of this write-off was a decrease in net deferred tax assets and a charge to the income tax provision of $56 million during the second fiscal quarter and first nine months of 2013.

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

	Three Months Ended July 31							Nine Months Ended July 31
	2013			2012			% Change	2013			2012			% Change
Net sales and revenues:
Agriculture and turf	$	7,847		$	7,271		+8	$	22,029		$	19,730		+12
Construction and forestry	1,469			1,659			-11	4,344			4,724			-8
Total net sales	9,316			8,930			+4	26,373			24,454			+8
Financial services	587			565			+4	1,650			1,602			+3
Other revenues	107			95			+13	322			309			+4
Total net sales and revenues	$	10,010		$	9,590		+4	$	28,345		$	26,365		+8
Operating profit: *
Agriculture and turf	$	1,336		$	1,014		+32	$	3,684		$	2,991		+23
Construction and forestry	107			113			-5	259			356			-27
Financial services	234			170			+38	629			520			+21
Total operating profit	1,677			1,297			+29	4,572			3,867			+18
Reconciling items **	(127		)	(82		)	+55	(333		)	(256		)	+30
Income taxes	(553		)	(427		)	+30	(1,509		)	(1,234		)	+22
Net income attributable to Deere & Company	$	997		$	788		+26	$	2,730		$	2,377		+15

Intersegment sales and revenues:
Agriculture and turf net sales	$	18		$	18			$	54		$	64		-16
Construction and forestry net sales								1			1
Financial services	60			53			+13	163			172			-5

Equipment operations outside the U.S. and Canada:
Net sales	$	3,549		$	3,371		+5	$	10,039		$	9,505		+6
Operating profit	323			156			+107	830			558			+49

								July 31 2013			October 31 2012
Identifiable assets:
Agriculture and turf								$	10,902		$	10,429		+5
Construction and forestry								3,445			3,365			+2
Financial services								37,390			34,495			+8
Corporate								6,600			7,977			-17
Total assets								$	58,337		$	56,266		+4

* Operating profit 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.

** Reconciling items are primarily corporate expenses, certain external interest expense, certain foreign exchange gains and losses 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 financing receivables that are still accruing interest and non-performing financing receivables in millions of dollars follows:

	July 31, 2013
	30-59 Days Past Due		60-89 Days Past Due		90 Days or Greater Past Due		Total Past Due
Retail Notes:
Agriculture and turf	$	73	$	26	$	20	$	119
Construction and forestry	47		17		7		71
Other:
Agriculture and turf	27		9		4		40
Construction and forestry	12		4		3		19
Total	$	159	$	56	$	34	$	249

	Total Past Due		Total Non- Performing		Current		Total Financing Receivables
Retail Notes:
Agriculture and turf	$	119	$	108	$	17,567	$	17,794
Construction and forestry	71		11		1,749		1,831
Other:
Agriculture and turf	40		13		7,375		7,428
Construction and forestry	19		5		1,168		1,192
Total	$	249	$	137	$	27,859	28,245
Less allowance for credit losses							171
Total financing receivables - net							$	28,074

	October 31, 2012
	30-59 Days Past Due		60-89 Days Past Due		90 Days or Greater Past Due		Total Past Due
Retail Notes:
Agriculture and turf	$	60	$	25	$	17	$	102
Construction and forestry	39		18		9		66
Other:
Agriculture and turf	21		6		3		30
Construction and forestry	8		2		2		12
Total	$	128	$	51	$	31	$	210

	Total Past Due		Total Non- Performing		Current		Total Financing Receivables
Retail Notes:
Agriculture and turf	$	102	$	117	$	16,432	$	16,651
Construction and forestry	66		13		1,521		1,600
Other:
Agriculture and turf	30		11		6,464		6,505
Construction and forestry	12		3		1,183		1,198
Total	$	210	$	144	$	25,600	25,954
Less allowance for credit losses							177
Total financing receivables - net							$	25,777

	July 31, 2012
	30-59 Days Past Due		60-89 Days Past Due		90 Days or Greater Past Due		Total Past Due
Retail Notes:
Agriculture and turf	$	77	$	27	$	23	$	127
Construction and forestry	41		20		9		70
Other:
Agriculture and turf	18		5		4		27
Construction and forestry	10		4		3		17
Total	$	146	$	56	$	39	$	241

	Total Past Due		Total Non- Performing		Current		Total Financing Receivables
Retail Notes:
Agriculture and turf	$	127	$	130	$	15,121	$	15,378
Construction and forestry	70		14		1,403		1,487
Other:
Agriculture and turf	27		13		5,908		5,948
Construction and forestry	17		2		1,192		1,211
Total	$	241	$	159	$	23,624	24,024
Less allowance for credit losses							175
Total financing receivables - net							$	23,849

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

	Three Months Ended
	July 31, 2013
	Retail Notes			Revolving Charge Accounts			Other			Total
Allowance:
Beginning of period balance	$	105		$	41		$	30		$	176
Provision	1			2			1			4
Write-offs	(3		)	(6		)	(1		)	(10		)
Recoveries	3			4						7
Translation adjustments	(6		)							(6		)
End of period balance	$	100		$	41		$	30		$	171

	Nine Months Ended
	July 31, 2013
Allowance:
Beginning of period balance	$	110		$	40		$	27		$	177
Provision (credit)	(2		)	4			5			7
Write-offs	(10		)	(15		)	(2		)	(27		)
Recoveries	8			12			1			21
Translation adjustments	(6		)				(1		)	(7		)
End of period balance	$	100		$	41		$	30		$	171
Balance individually evaluated *							$	4		$	4
Financing receivables:
End of period balance	$	19,626		$	2,577