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, 2014

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 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 July 31, 2014, 358,420,496 shares of common stock, $1 par value, of the registrant were outstanding.

Index to Exhibits: Page 56

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

DEERE & COMPANY
STATEMENT OF CONSOLIDATED INCOME
For the Three Months Ended July 31, 2014 and 2013
(In millions of dollars and shares except per share amounts) Unaudited

	2014		2013
Net Sales and Revenues
Net sales	$	8,723.0	$	9,315.6
Finance and interest income	573.5		530.9
Other income	203.7		163.4
Total	9,500.2		10,009.9

Costs and Expenses
Cost of sales	6,611.3		6,837.9
Research and development expenses	362.1		338.7
Selling, administrative and general expenses	820.7		919.8
Interest expense	153.9		182.6
Other operating expenses	260.0		181.6
Total	8,208.0		8,460.6

Income of Consolidated Group before Income Taxes	1,292.2		1,549.3
Provision for income taxes	450.2		553.5
Income of Consolidated Group	842.0		995.8
Equity in income of unconsolidated affiliates	8.9		.8
Net Income	850.9		996.6
Less: Net income attributable to noncontrolling interests	.2		.1
Net Income Attributable to Deere & Company	$	850.7	$	996.5

Per Share Data
Basic	$	2.35	$	2.58
Diluted	$	2.33	$	2.56

Average Shares Outstanding
Basic	361.9		386.0
Diluted	365.1		389.6

See Condensed Notes to Interim Consolidated Financial Statements.

DEERE & COMPANY
STATEMENT OF CONSOLIDATED COMPREHENSIVE INCOME
For the Three Months Ended July 31, 2014 and 2013
(In millions of dollars) Unaudited

	2014			2013

Net Income	$	850.9		$	996.6

Other Comprehensive Income (Loss), Net of Income Taxes
Retirement benefits adjustment	37.3			67.2
Cumulative translation adjustment	(24.5		)	(103.4		)
Unrealized gain on derivatives	1.8			4.0
Unrealized gain (loss) on investments	4.2			(12.6		)
Other Comprehensive Income (Loss), Net of Income Taxes	18.8			(44.8		)

Comprehensive Income of Consolidated Group	869.7			951.8
Less: Comprehensive income attributable to noncontrolling interests	.2			.1
Comprehensive Income Attributable to Deere & Company	$	869.5		$	951.7

See Condensed Notes to Interim Consolidated Financial Statements.

DEERE & COMPANY
STATEMENT OF CONSOLIDATED INCOME
For the Nine Months Ended July 31, 2014 and 2013
(In millions of dollars and shares except per share amounts) Unaudited

	2014		2013
Net Sales and Revenues
Net sales	$	24,917.8	$	26,373.5
Finance and interest income	1,649.0		1,544.0
Other income	535.3		427.4
Total	27,102.1		28,344.9

Costs and Expenses
Cost of sales	18,678.7		19,334.9
Research and development expenses	1,039.9		1,072.1
Selling, administrative and general expenses	2,433.0		2,657.7
Interest expense	491.5		553.7
Other operating expenses	738.1		487.3
Total	23,381.2		24,105.7

Income of Consolidated Group before Income Taxes	3,720.9		4,239.2
Provision for income taxes	1,209.6		1,508.8
Income of Consolidated Group	2,511.3		2,730.4
Equity in income of unconsolidated affiliates	2.2		.2
Net Income	2,513.5		2,730.6
Less: Net income attributable to noncontrolling interests	1.0		.1
Net Income Attributable to Deere & Company	$	2,512.5	$	2,730.5

Per Share Data
Basic	$	6.85	$	7.04
Diluted	$	6.79	$	6.97

Average Shares Outstanding
Basic	366.8		387.7
Diluted	370.1		391.7

See Condensed Notes to Interim Consolidated Financial Statements.

DEERE & COMPANY

STATEMENT OF CONSOLIDATED COMPREHENSIVE INCOME

For the Nine Months Ended July 31, 2014 and 2013

(In millions of dollars) Unaudited

	2014			2013

Net Income	$	2,513.5		$	2,730.6

Other Comprehensive Income (Loss), Net of Income Taxes
Retirement benefits adjustment	125.0			218.3
Cumulative translation adjustment	(86.0		)	(143.0		)
Unrealized gain on derivatives	4.1			9.8
Unrealized gain (loss) on investments	5.3			(12.4		)
Other Comprehensive Income (Loss), Net of Income Taxes	48.4			72.7

Comprehensive Income of Consolidated Group	2,561.9			2,803.3
Less: Comprehensive income attributable to noncontrolling interests	1.0			.1
Comprehensive Income Attributable to Deere & Company	$	2,560.9		$	2,803.2

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
	2014			2013			2013
Assets
Cash and cash equivalents	$	3,034.7		$	3,504.0		$	3,090.3
Marketable securities	1,489.4			1,624.8			1,706.0
Receivables from unconsolidated affiliates	33.3			31.2			26.0
Trade accounts and notes receivable - net	4,551.8			3,758.2			4,865.8
Financing receivables - net	27,079.9			25,632.7			24,183.1
Financing receivables securitized - net	4,264.2			4,153.1			3,890.5
Other receivables	1,193.1			1,464.0			1,031.5
Equipment on operating leases - net	3,580.0			3,152.2			2,826.0
Inventories	5,439.0			4,934.7			5,594.3
Property and equipment - net	5,385.5			5,466.9			5,107.6
Investments in unconsolidated affiliates	310.2			221.4			214.2
Goodwill	829.8			844.8			924.2
Other intangible assets - net	69.4			77.1			81.2
Retirement benefits	611.7			551.1			31.3
Deferred income taxes	2,564.0			2,325.4			3,468.1
Other assets	1,312.5			1,274.7			1,296.8
Assets held for sale				505.0
Total Assets	$	61,748.5		$	59,521.3		$	58,336.9

Liabilities and Stockholders’ Equity
Short-term borrowings	$	8,580.8		$	8,788.9		$	8,213.0
Short-term securitization borrowings	4,142.8			4,109.1			3,780.1
Payables to unconsolidated affiliates	90.4			106.9			80.5
Accounts payable and accrued expenses	8,432.9			8,973.6			8,306.3
Deferred income taxes	160.1			160.3			155.5
Long-term borrowings	24,035.5			21,577.7			21,698.7
Retirement benefits and other liabilities	5,473.5			5,416.7			7,511.2
Liabilities held for sale				120.4
Total liabilities	50,916.0			49,253.6			49,745.3

Commitments and contingencies (Note 14)

Common stock, $1 par value (issued shares at July 31, 2014 – 536,431,204)	3,652.8			3,524.2			3,498.7
Common stock in treasury	(11,742.7		)	(10,210.9		)	(9,441.6		)
Retained earnings	21,564.6			19,645.6			19,031.5
Accumulated other comprehensive income (loss)	(2,644.7		)	(2,693.1		)	(4,498.8		)
Total Deere & Company stockholders’ equity	10,830.0			10,265.8			8,589.8
Noncontrolling interests	2.5			1.9			1.8
Total stockholders’ equity	10,832.5			10,267.7			8,591.6
Total Liabilities and Stockholders’ Equity	$	61,748.5		$	59,521.3		$	58,336.9

See Condensed Notes to Interim Consolidated Financial Statements.

DEERE & COMPANY

STATEMENT OF CONSOLIDATED CASH FLOWS

For the Nine Months Ended July 31, 2014 and 2013

(In millions of dollars) Unaudited

	2014			2013
Cash Flows from Operating Activities
Net income	$	2,513.5		$	2,730.6
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses	29.6			14.0
Provision for depreciation and amortization	957.4			841.2
Impairment charges	62.3			50.4
Share-based compensation expense	60.6			62.7
Undistributed earnings of unconsolidated affiliates	(2.3		)	7.8
Credit for deferred income taxes	(249.1		)	(197.2		)
Changes in assets and liabilities:
Trade, notes and financing receivables related to sales	(1,679.3		)	(2,240.5		)
Insurance receivables	35.5			488.1
Inventories	(1,102.9		)	(954.2		)
Accounts payable and accrued expenses	(313.6		)	(408.6		)
Accrued income taxes payable/receivable	207.3			186.0
Retirement benefits	215.0			141.7
Other	(51.9		)	(134.2		)
Net cash provided by operating activities	682.1			587.8

Cash Flows from Investing Activities
Collections of receivables (excluding receivables related to sales)	11,586.6			10,807.9
Proceeds from maturities and sales of marketable securities	718.7			636.7
Proceeds from sales of equipment on operating leases	803.3			692.3
Proceeds from sales of businesses, net of cash sold	339.8			22.0
Cost of receivables acquired (excluding receivables related to sales)	(12,664.2		)	(12,404.6		)
Purchases of marketable securities	(585.5		)	(899.7		)
Purchases of property and equipment	(640.9		)	(795.1		)
Cost of equipment on operating leases acquired	(1,049.5		)	(834.8		)
Other	(75.6		)	(127.7		)
Net cash used for investing activities	(1,567.3		)	(2,903.0		)

Cash Flows from Financing Activities
Increase (decrease) in total short-term borrowings	(76.7		)	2,012.9
Proceeds from long-term borrowings	6,672.2			3,772.7
Payments of long-term borrowings	(4,079.8		)	(3,899.6		)
Proceeds from issuance of common stock	138.8			162.4
Repurchases of common stock	(1,631.1		)	(751.9		)
Dividends paid	(568.6		)	(556.3		)
Excess tax benefits from share-based compensation	28.5			46.5
Other	(50.4		)	(40.6		)
Net cash provided by financing activities	432.9			746.1

Effect of Exchange Rate Changes on Cash and Cash Equivalents	(17.0		)	7.2

Net Decrease in Cash and Cash Equivalents	(469.3		)	(1,561.9		)
Cash and Cash Equivalents at Beginning of Period	3,504.0			4,652.2
Cash and Cash Equivalents at End of Period	$	3,034.7		$	3,090.3

See Condensed Notes to Interim Consolidated Financial Statements.

DEERE & COMPANY

STATEMENT OF CHANGES IN CONSOLIDATED STOCKHOLDERS’ EQUITY

For the Nine Months Ended July 31, 2013 and 2014

(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, 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 (loss)	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



Balance October 31, 2013	$	10,267.7		$	3,524.2	$	(10,210.9	)	$	19,645.6		$	(2,693.1	)	$	1.9
Net income	2,513.5								2,512.5						1.0
Other comprehensive income (loss)	48.4											48.4
Repurchases of common stock	(1,631.1		)			(1,631.1		)
Treasury shares reissued	99.3					99.3
Dividends declared	(593.8		)						(593.5		)				(.3		)
Stock options and other	128.5			128.6											(.1		)
Balance July 31, 2014	$	10,832.5		$	3,652.8	$	(11,742.7	)	$	21,564.6		$	(2,644.7	)	$	2.5

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.

(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 $499 million and $408 million in the first nine months of 2014 and 2013, respectively. The Company also had accounts payable related to purchases of property and equipment of approximately $50 million and $74 million at July 31, 2014 and 2013, respectively.

(3) New accounting standards adopted in the first nine months of 2014 were as follows:

In the first quarter of 2014, the Company adopted Financial Accounting Standards Board (FASB) Accounting Standards Update (ASU) No. 2011-11, Disclosures about Offsetting Assets and Liabilities, which amends Accounting Standards Codification (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 includes derivatives and other financial securities arrangements. The adoption did not have a material effect on the Company’s consolidated financial statements.

In the first quarter of 2014, the Company adopted FASB 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 Company provided the disclosure in the notes. The adoption did not have a material effect on the Company’s consolidated financial statements.

In April 2014, the FASB issued ASU No. 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity, which amends ASC 205, Presentation of Financial Statements, and ASC 360, Property, Plant and Equipment. This ASU defines a discontinued operation as a component or group of components that is disposed of or meets the criteria as held for sale and represents a strategic shift that has or will have a major effect on an entity’s operations and financial results. This ASU requires additional disclosures about discontinued operations and new disclosures for components of an entity that are held for sale or disposed of and are individually significant but do not qualify for presentation as a discontinued operation. Early adoption is permitted for items that have not been reported as disposals or as held for sale in previously issued financial statements. The Company early adopted this standard in the second quarter of 2014. As a result, disposals that did not or will not meet the criteria for reporting in discontinued operations are presented in continuing operations.

New standards to be adopted are as follows:

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), which supersedes the revenue recognition requirements in ASC 605, Revenue Recognition. This ASU is based on the principle that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The ASU also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. The effective date will be the first quarter of fiscal year 2018 using one of two retrospective application methods. The Company has not determined the potential effects on the consolidated financial statements.

In June 2014, the FASB issued ASU No. 2014-12, Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period, which amends ASC Topic 718, Compensation - Stock Compensation. This ASU requires that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. Therefore, the performance target should not be reflected in estimating the grant-date fair value of the award. Compensation cost should be recognized in the period in which it becomes probable that the performance target will be achieved and should represent the compensation cost attributable to the period(s) for which the requisite service has already been rendered. The total compensation cost recognized during and after the requisite service period should reflect the number of awards that are expected to vest and should be adjusted to reflect those awards that ultimately vest. The effective date will be the first quarter of fiscal year 2017. The adoption will not have a material effect on the Company’s consolidated financial statements.

(4) The after-tax changes in accumulated other comprehensive income (loss) in millions of dollars follow:


	Retirement Benefits Adjustment		Cumulative Translation Adjustment			Unrealized Gain (Loss) on Derivatives		Unrealized Gain (Loss) on Investments		Total Accumulated Other Comprehensive Income (Loss)
Balance October 31, 2013	$	(2,809)	$	113		$	(3)	$	6	$	(2,693)
Other comprehensive income (loss) items before reclassification	12		(95)			(7)		5		(85)
Amounts reclassified from accumulated other comprehensive income	113		9		*	11				133
Net current period other comprehensive income (loss)	125		(86)			4		5		48
Balance July 31, 2014	$	(2,684)	$	27		$	1	$	11	$	(2,645)

* Represents the accumulated translation adjustments related to the foreign subsidiaries of the Water operations that were sold (see Note 19).

Following are amounts recorded in and reclassifications out of other comprehensive income (loss), and the income tax effects, in millions of dollars:

Three Months Ended July 31, 2014	Before Tax Amount			Tax (Expense) Credit			After Tax Amount
Cumulative translation adjustment:
Unrealized (loss) on translation adjustment	$	(33	)				$	(33	)
Reclassification of loss to Other expense *	9						9
Net unrealized (loss) on translation adjustment	(24		)				(24		)
Unrealized gain (loss) on derivatives:
Unrealized hedging (loss)	(2		)	$	1		(1		)
Reclassification of realized loss to:
Interest rate contracts – Interest expense	3			(1		)	2
Foreign exchange contracts – Other expense	1						1
Net unrealized gain on derivatives	2						2
Unrealized gain (loss) on investments:
Unrealized holding gain	6			(2		)	4
Net unrealized gain on investments	6			(2		)	4
Retirement benefits adjustment:
Pensions
Net actuarial gain	1						1
Reclassification through amortization of actuarial (gain) loss and prior service (credit) cost to net income: **
Actuarial loss	43			(16		)	27
Prior service cost	6			(2		)	4
Settlements/curtailments	2			(1		)	1
Health care and life insurance
Net actuarial (loss)	(1		)				(1		)
Reclassification through amortization of actuarial (gain) loss and prior service (credit) cost to net income: **
Actuarial loss	8			(3		)	5
Net unrealized gain on retirement benefits adjustments	59			(22		)	37
Total other comprehensive income (loss)	$	43		$	(24	)	$	19

* Represents the accumulated translation adjustments related to the foreign subsidiaries of the Water operations that were sold (see Note 19).

** These accumulated other comprehensive income amounts are included in net periodic postretirement costs. See Note 7 for additional detail.

Three Months Ended July 31, 2013	Before Tax Amount		Tax (Expense) Credit		After Tax Amount
Cumulative translation adjustment	$	(103)			$	(103)
Unrealized gain (loss) on derivatives:
Unrealized hedging gain	17		$	(6)	11
Reclassification of realized (gain) loss to:
Interest rate contracts – Interest expense	6		(2)		4
Foreign exchange contracts – Other expense	(17)		6		(11)
Net unrealized gain on derivatives	6		(2)		4
Unrealized gain (loss) on investments:
Unrealized holding (loss)	(19)		6		(13)
Net unrealized (loss) on investments	(19)		6		(13)
Retirement benefits adjustment:
Pensions
Net actuarial (loss)	(2)		1		(1)
Reclassification through amortization of actuarial (gain) loss and prior service (credit) cost to net income: *
Actuarial loss	66		(25)		41
Prior service cost	9		(3)		6
Health care and life insurance
Reclassification through amortization of actuarial (gain) loss and prior service (credit) cost to net income: *
Actuarial loss	35		(13)		22
Prior service (credit)	(2)		1		(1)
Net unrealized gain on retirement benefits adjustment	106		(39)		67
Total other comprehensive income (loss)	$	(10)	$	(35)	$	(45)

* These accumulated other comprehensive income amounts are included in net periodic postretirement costs. See Note 7 for additional detail.

In the third quarter of 2014 and 2013, the noncontrolling interests’ comprehensive income was $.2 million and $.1 million, respectively, which consisted of net income of $.2 million in 2014 and $.1 million in 2013.

Nine Months Ended July 31, 2014	Before Tax Amount			Tax (Expense) Credit			After Tax Amount
Cumulative translation adjustment:
Unrealized (loss) on translation adjustment	$	(96	)	$	1		$	(95	)
Reclassification of loss to Other expense *	9						9
Net unrealized (loss) on translation adjustment	(87		)	1			(86		)
Unrealized gain (loss) on derivatives:
Unrealized hedging (loss)	(11		)	4			(7		)
Reclassification of realized loss to:
Interest rate contracts – Interest expense	11			(4		)	7
Foreign exchange contracts – Other expense	7			(3		)	4
Net unrealized gain on derivatives	7			(3		)	4
Unrealized gain (loss) on investments:
Unrealized holding gain	8			(3		)	5
Net unrealized gain on investments	8			(3		)	5
Retirement benefits adjustment:
Pensions
Net actuarial (loss)	(19		)	8			(11		)
Reclassification through amortization of actuarial (gain) loss and prior service (credit) cost to net income: **
Actuarial loss	129			(47		)	82
Prior service cost	18			(7		)	11
Settlements/curtailments	8			(3		)	5
Health care and life insurance
Net actuarial gain	38			(15		)	23
Reclassification through amortization of actuarial (gain) loss and prior service (credit) cost to net income: **
Actuarial loss	25			(9		)	16
Prior service (credit)	(2		)	1			(1		)
Net unrealized gain on retirement benefits adjustment	197			(72		)	125
Total other comprehensive income (loss)	$	125		$	(77	)	$	48

* Represents the accumulated translation adjustments related to the foreign subsidiaries of the Water operations that were sold (see Note 19).

** These accumulated other comprehensive income amounts are included in net periodic postretirement costs. See Note 7 for additional detail.

Nine Months Ended July 31, 2013	Before Tax Amount			Tax (Expense) Credit			After Tax Amount
Cumulative translation adjustment	$	(148	)	$	5		$	(143	)
Unrealized gain (loss) on derivatives:
Unrealized hedging gain	21			(7		)	14
Reclassification of realized (gain) loss to:
Interest rate contracts – Interest expense	17			(6		)	11
Foreign exchange contracts – Other expense	(23		)	8			(15		)
Net unrealized gain on derivatives	15			(5		)	10
Unrealized gain (loss) on investments:
Unrealized holding (loss)	(19		)	7			(12		)
Net unrealized (loss) on investment	(19		)	7			(12		)
Retirement benefits adjustment:
Pensions
Net actuarial (loss)	(75		)	28			(47		)
Reclassification through amortization of actuarial (gain) loss and prior service (credit) cost to net income: *
Actuarial loss	194			(71		)	123
Prior service cost	25			(9		)	16
Settlements/curtailments	1						1
Health care and life insurance
Net actuarial gain	99			(37		)	62
Reclassification through amortization of actuarial (gain) loss and prior service (credit) cost to net income: *
Actuarial loss	105			(40		)	65
Prior service (credit)	(4		)	2			(2		)
Net unrealized gain on retirement benefits adjustment	345			(127		)	218
Total other comprehensive income (loss)	$	193		$	(120	)	$	73

* These accumulated other comprehensive income amounts are included in net periodic postretirement costs. See Note 7 for additional detail.

In the first nine months of 2014 and 2013, the noncontrolling interests’ comprehensive income was $1.0 million and $.1 million, respectively, which consisted of net income of $1.0 million in 2014 and $.1 million in 2013.

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

	Three Months Ended July 31				Nine Months Ended July 31
	2014		2013		2014		2013

Dividends declared	$	.60	$	.51	$	1.62	$	1.48
Dividends paid	$	.51	$	.51	$	1.53	$	1.43

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

	Three Months Ended July 31				Nine Months Ended July 31
	2014		2013		2014		2013
Net income attributable to Deere & Company	$	850.7	$	996.5	$	2,512.5	$	2,730.5
Less income allocable to participating securities	.3		.2		.8		.8
Income allocable to common stock	$	850.4	$	996.3	$	2,511.7	$	2,729.7
Average shares outstanding	361.9		386.0		366.8		387.7
Basic per share	$	2.35	$	2.58	$	6.85	$	7.04

Average shares outstanding	361.9		386.0		366.8		387.7
Effect of dilutive share-based compensation	3.2		3.6		3.3		4.0
Total potential shares outstanding	365.1		389.6		370.1		391.7
Diluted per share	$	2.33	$	2.56	$	6.79	$	6.97

During the third quarter and first nine months of 2014 and 2013, 2.4 million shares and 2.5 million shares, respectively, in both periods were excluded from the above 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 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
	2014			2013			2014			2013
Service cost	$	61		$	68		$	184		$	204
Interest cost	119			107			358			329
Expected return on plan assets	(192		)	(193		)	(578		)	(583		)
Amortization of actuarial loss	43			66			129			194
Amortization of prior service cost	6			9			18			25
Settlements/curtailments	2						8			1
Net cost	$	39		$	57		$	119		$	170

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
	2014			2013			2014			2013
Service cost	$	11		$	14		$	33		$	43
Interest cost	66			64			197			191
Expected return on plan assets	(18		)	(21		)	(53		)	(63		)
Amortization of actuarial loss	8			35			25			105
Amortization of prior service credit				(2		)	(2		)	(4		)
Net cost	$	67		$	90		$	200		$	272

During the first nine months of 2014, the Company contributed approximately $70 million to its pension plans and $26 million to its other postretirement benefit plans. The Company presently anticipates contributing an additional $24 million to its pension plans and $8 million to its other postretirement benefit plans in the remainder of fiscal year 2014. 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, 2014 were $207 million, compared to $272 million at October 31, 2013. The liability at July 31, 2014 consisted of approximately $55 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 2014 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.

(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
	2014			2013			% Change	2014			2013			% Change
Net sales and revenues:
Agriculture and turf	$	6,969		$	7,847		-11	$	20,211		$	22,029		-8
Construction and forestry	1,754			1,469			+19	4,707			4,344			+8
Total net sales	8,723			9,316			-6	24,918			26,373			-6
Financial services	656			587			+12	1,815			1,650			+10
Other revenues	121			107			+13	369			322			+15
Total net sales and revenues	$	9,500		$	10,010		-5	$	27,102		$	28,345		-4
Operating profit: *
Agriculture and turf	$	941		$	1,336		-30	$	2,967		$	3,684		-19
Construction and forestry	194			107			+81	420			259			+62
Financial services	249			234			+6	660			629			+5
Total operating profit	1,384			1,677			-17	4,047			4,572			-11
Reconciling items **	(83		)	(127		)	-35	(324		)	(333		)	-3
Income taxes	(450		)	(553		)	-19	(1,210		)	(1,509		)	-20
Net income attributable to Deere & Company	$	851		$	997		-15	$	2,513		$	2,730		-8

Intersegment sales and revenues:
Agriculture and turf net sales	$	24		$	18		+33	$	66		$	54		+22
Construction and forestry net sales								1			1
Financial services	64			60			+7	169			163			+4

Equipment operations outside the U.S. and Canada:
Net sales	$	3,419		$	3,549		-4	$	9,698		$	10,039		-3
Operating profit	295			323			-9	847			830			+2

	July 31 2014		October 31 2013
Identifiable assets:
Agriculture and turf	$	10,508	$	10,799	-3
Construction and forestry	3,518		3,461		+2
Financial services	42,737		38,646		+11
Corporate	4,986		6,615		-25
Total assets	$	61,749	$	59,521	+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 still accruing finance income 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, 2014
	30-59 Days Past Due		60-89 Days Past Due		90 Days or Greater Past Due		Total Past Due
Retail Notes:
Agriculture and turf	$	99	$	38	$	30	$	167
Construction and forestry	61		20		12		93
Other:
Agriculture and turf	22		10		8		40
Construction and forestry	15		5		2		22
Total	$	197	$	73	$	52	$	322

	Total Past Due		Total Non- Performing		Current		Total Financing Receivables
Retail Notes:
Agriculture and turf	$	167	$	117	$	19,458	$	19,742
Construction and forestry	93		18		2,237		2,348
Other:
Agriculture and turf	40		85		8,169		8,294
Construction and forestry	22		6		1,112		1,140
Total	$	322	$	226	$	30,976	31,524
Less allowance for credit losses							180
Total financing receivables - net