01—Abstract
Summary
Summary of the 10-K/A filed February 1, 2016. Cited figures are marked; the original filing is the authoritative source.
Deere & Company's fiscal 2015 (year ended October 31, 2015) was a sharply weaker year, driven by a downturn in agricultural and turf demand.
Net sales fell 22% to $25.8 billiona from $33.0 billion, and total net sales and revenues fell 20% to $28.9 billion. Net income attributable to Deere dropped 39% to $1.94 billion, and diluted EPS fell to $5.77 from $8.63. Agriculture and turf operating profit fell 55% to $1.65 billion, while construction and forestry operating profit declined 19% to $528 million.
Financial Services operating profit rose 5% to $963 millionb, providing a partial offset. Operating cash flow rose to $3.74 billion, and the company returned capital through $2.77 billion of share repurchases and $816 million of dividends paid, while still increasing the quarterly dividend declared to $0.60 per share. The balance sheet shows meaningful strain on equity.
Total Deere stockholders' equity fell to $6.74 billionc from $9.06 billion, largely because of buybacks that exceeded earnings, a $935 million cumulative translation loss, and a $946 million total other comprehensive loss. Treasury stock grew to $15.5 billion. Deere recorded a $384 million valuation allowance on deferred tax assets, which pushed the effective tax rate up sharply and contributed to the earnings decline.
Total assets were $57.9 billiond, and the equipment operations held $3.8 billion of inventory. Long-term borrowings were $23.8 billion, mostly within Financial Services. This document is Amendment No. 1 to the original 10-K filed December 18, 2015.
Its sole purpose was to correct typographical errors in the auditor's report (Deloitte & Touche LLP) regarding the three-year period covered. The financial statements themselves are unchanged from the original filing, so investors should rely on the original 10-K for the same underlying data.
02—Key points
Key Highlights
- Net sales fell 22% to $25.8 billion in FY2015 from $33.0 billion in FY2014, with agriculture and turf net sales down 25% to $19.8 billion and construction and forestry net sales down 9% to $6.0 billion.
- Net income attributable to Deere & Company declined 39% to $1.94 billion; diluted EPS was $5.77 versus $8.63 a year earlier, reflecting lower volumes and a $384 million deferred tax valuation allowance charge.
- Agriculture and turf operating profit fell to $1.65 billion from $3.65 billion, while Financial Services operating profit grew 5% to $963 million, cushioning the overall decline.
- Operating cash flow increased to $3.74 billion from $3.53 billion, and the company repurchased $2.77 billion of common stock, leaving $3.46 billion remaining under its December 2013 $8.0 billion authorization.
- Total Deere stockholders' equity dropped to $6.74 billion from $9.06 billion, driven by buybacks, a $935 million currency translation loss, and pension-related losses; treasury stock reached $15.5 billion.
- The company declared a $2.40 per share annual dividend for 2015 (up from $2.22) and declared a $0.60 quarterly dividend in December 2015, payable February 1, 2016.
- This 10-K/A only corrects typographical errors in the auditor's report and does not change any financial disclosures from the original December 18, 2015 10-K.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2015, Deere & Co kept $0.07.
- Revenue$28.86B100.0%
- Cost of revenue−$20.14B69.8%
- Gross profit$8.72B30.2%
- Operating costs−$5.58B19.3%
- Operating income$3.14B10.9%
- Interest, other & tax−$1.20B4.2%
- Net income$1.94B6.7%
Where FY2015 revenue went
$28.86B- Cost of revenue: $20.14B, 70% of revenue
- Net income: $1.94B, 6.7% of revenue
- R&D: $1.43B, 4.9% of revenue
- SG&A: $2.87B, 10.0% of revenue
- Other operating costs: $1.28B, 4.4% of revenue
- Interest, other & tax: $1.20B, 4.2% of revenue
Kept 6.7% as net incomeNet income $1.94B · 6.7%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-K/AFY2015filed February 1, 2016Financial Statements
FY2015 against FY2014
| Line item | FY2015FY2014 | Change |
|---|---|---|
| Revenue | $28.86B$36.07B | −20.0% |
| Cost of Revenue | $20.14B$24.78B | −18.7% |
| Gross Profit | $8.72B$11.29B | −22.8% |
| R&D Expenses | $1.43B$1.45B | −1.9% |
| SG&A Expenses | $2.87B$3.28B | −12.5% |
| Operating Expenses | $26.08B$31.27B | −16.6% |
| Operating Income | $3.14B$5.22B | −39.8% |
| Interest Expense | $680.00M$664.00M | +2.4% |
| Net Income | $1.94B$3.16B | −38.6% |
| EPS (Basic) | $5.81$8.71 | −33.3% |
| EPS (Diluted) | $5.77$8.63 | −33.1% |
| Shares Outstanding (Basic) | 333.60M363.00M | −8.1% |
| Shares Outstanding (Diluted) | 336.00M366.10M | −8.2% |
05—Questions
Frequently Asked Questions
Why did Deere's earnings decline so much in fiscal 2015?
The decline was driven primarily by lower agriculture and turf volumes and pricing, as net sales in that segment fell 25% to $19.8 billion. Agriculture and turf operating profit dropped 55% to $1.65 billion. Net income was also reduced by a $384 million valuation allowance on deferred tax assets, and the effective tax rate rose to about 43% from about 34% the prior year.
How strong is Deere's cash generation and capital return program?
Consolidated operating cash flow rose to $3.74 billion in 2015. The company spent $2.77 billion on share repurchases and $816 million on dividends, which exceeded free cash flow after capital expenditures and equipment on operating lease investments. Deere funded the gap with net new borrowings and cash on hand. Cash and equivalents grew to $4.16 billion, and the company had $4.03 billion of unused lines of credit at year end.
What is the outlook for the balance sheet and leverage?
Total assets were $57.9 billion and total liabilities were $51.2 billion at October 31, 2015. Most debt sits in Financial Services, where long-term borrowings were $19.4 billion and short-term borrowings were $8.0 billion, supported by $4.8 billion of securitized receivables. Equipment operations carried $4.5 billion of long-term debt. The filing states that all credit agreement covenants were met, and the equipment operations had $16.4 billion of additional debt capacity under the total debt to capital covenant.
Does this amended filing change Deere's reported financial results?
No. Amendment No. 1 was filed solely to restate the Report of Independent Registered Public Accounting Firm to correct typographical errors in its references to the three-year audit period, following SEC staff comments. The explanatory note states that no other disclosures, including the financial statements, were changed, and the amendment speaks as of the original filing date.
What did the company say about future pension and tax accounting changes?
Beginning in fiscal 2016, Deere will change how it estimates service and interest cost components of pension and other postretirement benefit expense, moving to a spot yield curve approach. This is treated as a prospective change in estimate and does not change total benefit obligations. Separately, the company expects its accumulated foreign earnings of $5.28 billion to remain reinvested outside the U.S. indefinitely, so no U.S. tax provision has been recorded on them.
06—Continue