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, 2011

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, 2011, 413,924,013 shares of common stock, $1 par value, of the registrant were outstanding.

Index to Exhibits: Page 47

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

DEERE & COMPANY
STATEMENT OF CONSOLIDATED INCOME
For the Three Months Ended July 31, 2011 and 2010
(In millions of dollars and shares except per share amounts) Unaudited


	2011		2010
Net Sales and Revenues
Net sales	$	7,721.6	$	6,224.0
Finance and interest income	492.2		448.4
Other income	158.1		164.5
Total	8,371.9		6,836.9

Costs and Expenses
Cost of sales	5,792.2		4,519.6
Research and development expenses	312.0		256.3
Selling, administrative and general expenses	815.8		751.2
Interest expense	184.3		193.1
Other operating expenses	188.5		195.0
Total	7,292.8		5,915.2

Income of Consolidated Group before Income Taxes	1,079.1		921.7
Provision for income taxes	369.5		308.1
Income of Consolidated Group	709.6		613.6
Equity in income of unconsolidated affiliates	5.2		5.9
Net Income	714.8		619.5
Less: Net income attributable to noncontrolling interests	2.5		2.5
Net Income Attributable to Deere & Company	$	712.3	$	617.0

Per Share Data
Basic	$	1.71	$	1.45
Diluted	$	1.69	$	1.44

Average Shares Outstanding
Basic	417.4		424.5
Diluted	422.0		429.0

See Condensed Notes to Interim Consolidated Financial Statements.

DEERE & COMPANY
STATEMENT OF CONSOLIDATED INCOME
For the Nine Months Ended July 31, 2011 and 2010
(In millions of dollars and shares except per share amounts) Unaudited


	2011		2010
Net Sales and Revenues
Net sales	$	21,563.0	$	17,009.5
Finance and interest income	1,420.7		1,350.7
Other income	417.1		442.4
Total	23,400.8		18,802.6

Costs and Expenses
Cost of sales	15,993.2		12,490.3
Research and development expenses	879.3		758.1
Selling, administrative and general expenses	2,309.0		2,126.5
Interest expense	579.1		618.9
Other operating expenses	474.3		533.9
Total	20,234.9		16,527.7

Income of Consolidated Group before Income Taxes	3,165.9		2,274.9
Provision for income taxes	1,040.7		866.4
Income of Consolidated Group	2,125.2		1,408.5
Equity in income of unconsolidated affiliates	10.6		6.4
Net Income	2,135.8		1,414.9
Less: Net income attributable to noncontrolling interests	5.5		7.2
Net Income Attributable to Deere & Company	$	2,130.3	$	1,407.7

Per Share Data
Basic	$	5.07	$	3.32
Diluted	$	5.01	$	3.28

Average Shares Outstanding
Basic	419.9		424.1
Diluted	425.2		428.4

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
	2011			2010			2010
Assets
Cash and cash equivalents	$	3,618.3		$	3,790.6		$	3,753.7
Marketable securities	459.4			227.9			232.3
Receivables from unconsolidated affiliates	32.3			38.8			31.9
Trade accounts and notes receivable - net	3,844.5			3,464.2			3,527.2
Financing receivables - net	19,437.0			17,682.2			16,236.1
Financing receivables securitized - net	2,480.6			2,238.3			2,631.8
Other receivables	960.9			925.6			693.1
Equipment on operating leases - net	2,015.0			1,936.2			1,777.9
Inventories	4,687.7			3,063.0			3,175.4
Property and equipment - net	4,068.9			3,790.7			4,398.6
Investments in unconsolidated affiliates	224.7			244.5			232.7
Goodwill	1,023.2			998.6			992.9
Other intangible assets - net	133.4			117.0			126.1
Retirement benefits	230.9			146.7			197.8
Deferred income taxes	2,825.1			2,477.1			2,592.5
Other assets	1,093.2			1,194.0			1,210.3
Assets held for sale				931.4
Total Assets	$	47,135.1		$	43,266.8		$	41,810.3

Liabilities and Stockholders’ Equity
Short-term borrowings	$	7,927.9		$	5,325.7		$	4,908.4
Short-term securitization borrowings	2,380.9			2,208.8			2,577.3
Payables to unconsolidated affiliates	143.8			203.5			161.3
Accounts payable and accrued expenses	7,121.3			6,481.7			5,855.5
Deferred income taxes	160.0			144.3			133.2
Long-term borrowings	15,892.5			16,814.5			16,374.2
Retirement benefits and other liabilities	5,968.7			5,784.9			5,674.6
Total liabilities	39,595.1			36,963.4			35,684.5

Commitments and contingencies (Note 14)

Common stock, $1 par value (issued shares at July 31, 2011 – 536,431,204)	3,231.1			3,106.3			3,075.0
Common stock in treasury	(6,723.9		)	(5,789.5		)	(5,598.0		)
Retained earnings	14,017.7			12,353.1			12,023.1
Accumulated other comprehensive income (loss)	(2,997.3		)	(3,379.6		)	(3,384.9		)
Total Deere & Company stockholders’ equity	7,527.6			6,290.3			6,115.2
Noncontrolling interests	12.4			13.1			10.6
Total stockholders’ equity	7,540.0			6,303.4			6,125.8
Total Liabilities and Stockholders’ Equity	$	47,135.1		$	43,266.8		$	41,810.3

See Condensed Notes to Interim Consolidated Financial Statements.

DEERE & COMPANY
STATEMENT OF CONSOLIDATED CASH FLOWS
For the Nine Months Ended July 31, 2011 and 2010
(In millions of dollars) Unaudited


	2011			2010
Cash Flows from Operating Activities
Net income	$	2,135.8		$	1,414.9
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for doubtful receivables	17.8			84.8
Provision for depreciation and amortization	677.9			692.9
Share-based compensation expense	50.8			61.5
Undistributed earnings of unconsolidated affiliates	1.1			(1.0		)
Provision (credit) for deferred income taxes	(324.8		)	106.6
Changes in assets and liabilities:
Trade, notes and financing receivables related to sales	(978.8		)	(1,169.2		)
Inventories	(1,774.6		)	(1,067.9		)
Accounts payable and accrued expenses	571.9			619.9
Accrued income taxes payable/receivable	266.3			128.9
Retirement benefits	351.1			(67.3		)
Other	(358.4		)	284.0
Net cash provided by operating activities	636.1			1,088.1

Cash Flows from Investing Activities
Collections of receivables (excluding receivables related to sales)	9,317.4			8,390.9
Proceeds from maturities and sales of marketable securities	24.5			23.5
Proceeds from sales of equipment on operating leases	522.8			463.5
Government grants related to property and equipment				92.3
Proceeds from sales of businesses, net of cash sold	894.4			25.0
Cost of receivables acquired (excluding receivables related to sales)	(10,286.7		)	(9,032.5		)
Purchases of marketable securities	(256.1		)	(55.0		)
Purchases of property and equipment	(681.5		)	(457.5		)
Cost of equipment on operating leases acquired	(397.4		)	(381.8		)
Acquisitions of businesses, net of cash acquired	(60.8		)	(43.1		)
Other	(143.5		)	(41.3		)
Net cash used for investing activities	(1,066.9		)	(1,016.0		)

Cash Flows from Financing Activities
Increase in total short-term borrowings	844.3			239.9
Proceeds from long-term borrowings	3,515.1			1,836.9
Payments of long-term borrowings	(2,795.2		)	(2,599.6		)
Proceeds from issuance of common stock	165.9			68.0
Repurchases of common stock	(1,093.2		)	(102.8		)
Dividends paid	(422.2		)	(356.2		)
Excess tax benefits from share-based compensation	66.8			19.3
Other	(36.3		)	(28.1		)
Net cash provided by (used for) financing activities	245.2			(922.6		)

Effect of Exchange Rate Changes on Cash and Cash Equivalents	13.3			(47.5		)

Net Decrease in Cash and Cash Equivalents	(172.3		)	(898.0		)
Cash and Cash Equivalents at Beginning of Period	3,790.6			4,651.7
Cash and Cash Equivalents at End of Period	$	3,618.3		$	3,753.7

See Condensed Notes to Interim Consolidated Financial Statements.

DEERE & COMPANY

STATEMENT OF CHANGES IN CONSOLIDATED STOCKHOLDERS’ EQUITY

For the Nine Months Ended July 31, 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	1,414.9			$	1,407.7							1,407.7						7.2
Other comprehensive income (loss)
Retirement benefits adjustment	312.1			312.1											312.1
Cumulative translation adjustment	(121.5		)	(121.3		)									(121.3		)	(.2		)
Unrealized gain on derivatives	14.0			14.0											14.0
Unrealized gain on investments	3.6			3.6											3.6
Comprehensive income	1,623.1			$	1,616.1													7.0

Repurchases of common stock	(102.8		)						(102.8		)
Treasury shares reissued	69.5								69.5
Dividends declared	(365.3		)									(365.1		)				(.2		)
Stock options and other	78.5						78.8											(.3		)
Balance July 31, 2010	$	6,125.8					$	3,075.0	$	(5,598.0	)	$	12,023.1		$	(3,384.9	)	$	10.6



Balance October 31, 2010	$	6,303.4					$	3,106.3	$	(5,789.5	)	$	12,353.1		$	(3,379.6	)	$	13.1
Net income	2,135.8			$	2,130.3							2,130.3						5.5
Other comprehensive income (loss)
Retirement benefits adjustment	171.6			171.6											171.6
Cumulative translation adjustment	197.9			197.9											197.9
Unrealized gain on derivatives	13.2			13.2											13.2
Unrealized loss on investments	(.4		)	(.4		)									(.4		)
Comprehensive income	2,518.1			$	2,512.6													5.5

Repurchases of common stock	(1,093.2		)						(1,093.2		)
Treasury shares reissued	158.8								158.8
Dividends declared	(469.9		)									(465.7		)				(4.2		)
Stock options and other	122.8						124.8											(2.0		)
Balance July 31, 2011	$	7,540.0					$	3,231.1	$	(6,723.9	)	$	14,017.7		$	(2,997.3	)	$	12.4

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:

	July 31 2011		October 31 2010		July 31 2010
Intercompany receivables	$	14	$	10	$	13
Inventories	36		32		54
Property and equipment - net	4		4		5
Other assets	14		11		6
Total assets	$	68	$	57	$	78

Short-term borrowings					$	5
Accounts payable and accrued expenses	$	64	$	55	72
Total liabilities	$	64	$	55	$	77

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		July 31 2010
Receivables - net			$	2
Property and equipment - net			130
Other assets			1
Assets held for sale *	$	133
Total assets	$	133	$	133

Intercompany borrowings	$	50	$	46
Accounts payable and accrued expenses	5		5
Total liabilities	$	55	$	51

* 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 $291 million and $249 million in the first nine months of 2011 and 2010, respectively. The Company also had accounts payable related to purchases of property and equipment of approximately $41 million and $39 million at July 31, 2011 and 2010, respectively.

(3) New accounting standards adopted in the first nine 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 Level 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.

In June 2011, the FASB issued ASU No. 2011-05, Presentation of Comprehensive Income, which amends ASC 220, Comprehensive Income. The 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. In either presentation, adjustments for items that are reclassified from other comprehensive income to net income must be shown on the face of the financial statements. The other comprehensive income items may be shown net of tax effects with the taxes disclosed in a note, or pretax with the total taxes presented in one amount. The requirements do not change how earnings per share is calculated or presented. The effective date will be the first quarter of fiscal year 2013 and must be applied retrospectively. The adoption will not have a material effect on the Company’s consolidated financial statements.

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

	Three Months Ended July 31				Nine Months Ended July 31
	2011		2010		2011		2010

Net income	$	714.8	$	619.5	$	2,135.8	$	1,414.9
Other comprehensive income (loss), net of tax:
Retirement benefits adjustment	69.3		85.1		171.6		312.1
Cumulative translation adjustment	(46.2)		(46.0)		197.9		(121.5)
Unrealized gain (loss) on derivatives	3.6		(7.9)		13.2		14.0
Unrealized gain (loss) on investments	3.0		3.0		(.4)		3.6
Comprehensive income	$	744.5	$	653.7	$	2,518.1	$	1,623.1

For the third quarter of 2011 and 2010, the table above includes noncontrolling interests’ comprehensive income of $2.3 million and $2.5 million, which consists of net income of $2.5 million and $2.5 million and cumulative translation adjustments of $(.2) million and none, respectively. For the first nine months of 2011 and 2010, the table includes noncontrolling interests’ comprehensive income of $5.5 million and $7.0 million, which consists of net income of $5.5 million and $7.2 million and cumulative translation adjustments of none and $(.2) million, respectively.

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

	Three Months Ended July 31				Nine Months Ended July 31
	2011		2010		2011		2010

Dividends declared	$	.41	$	.30	$	1.11	$	.86
Dividends paid	$	.35	$	.28	$	1.00	$	.84

(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
	2011	2010	2011	2010
Net income attributable to Deere & Company	$ 712.3	$ 617.0	$ 2,130.3	$ 1,407.7
Less income allocable to participating securities	.3	.2	.8	.5
Income allocable to common stock	$ 712.0	$ 616.8	$ 2,129.5	$ 1,407.2
Average shares outstanding	417.4	424.5	419.9	424.1
Basic per share	$ 1.71	$ 1.45	$ 5.07	$ 3.32

Average shares outstanding	417.4	424.5	419.9	424.1
Effect of dilutive share-based compensation	4.6	4.5	5.3	4.3
Total potential shares outstanding	422.0	429.0	425.2	428.4
Diluted per share	$ 1.69	$ 1.44	$ 5.01	$ 3.28

During the third quarter of 2011, 3.9 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 first nine months of 2011, no shares were excluded. During both periods of 2010, 1.9 million shares were excluded.

(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 July 31				Nine Months Ended July 31
	2011		2010		2011		2010
Service cost	$	50	$	42	$	149	$	129
Interest cost	124		126		372		382
Expected return on plan assets	(199)		(189)		(597)		(570)
Amortization of actuarial loss	39		28		112		87
Amortization of prior service cost	10		10		31		31
Settlements/curtailments	1		14		1		17
Net cost	$	25	$	31	$	68	$	76

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
	2011		2010		2011		2010
Service cost	$	11	$	11	$	33	$	33
Interest cost	81		84		244		252
Expected return on plan assets	(28)		(30)		(85)		(91)
Amortization of actuarial loss	68		78		203		233
Amortization of prior service credit	(4)		(5)		(11)		(12)
Net cost	$	128	$	138	$	384	$	415

During the first nine months of 2011, the Company contributed approximately $58 million to its pension plans and $34 million to its other postretirement benefit plans. The Company presently anticipates contributing an additional $24 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 July 31, 2011 were $207 million, compared to $218 million at October 31, 2010. The liability at July 31, 2011 consisted of approximately $54 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 2007 and 2008 U.S. Internal Revenue Service examinations were closed in the third quarter of 2011. All U.S. federal examinations of the Company’s income tax returns prior to 2009 have now been completed. The changes in the unrecognized tax benefits in the first nine 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 first nine months of 2010.

(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
	2011		2010		% Change	2011		2010		% Change
Net sales and revenues:
Agriculture and turf	$	6,371	$	5,217	+22	$	17,740	$	14,462	+23
Construction and forestry	1,351		1,007		+34	3,823		2,547		+50
Total net sales	7,722		6,224		+24	21,563		17,009		+27
Financial services *	550		528		+4	1,548		1,532		+1
Other revenues	100		85		+18	290		262		+11
Total net sales and revenues	$	8,372	$	6,837	+22	$	23,401	$	18,803	+24
Operating profit: **
Agriculture and turf	$	859	$	824	+4	$	2,579	$	2,128	+21
Construction and forestry	110		66		+67	304		65		+368
Financial services *	194		148		+31	529		360		+47
Total operating profit	1,163		1,038		+12	3,412		2,553		+34
Other reconciling items ***	(451)		(421)		+7	(1,282)		(1,145)		+12
Net income attributable to Deere & Company	$	712	$	617	+15	$	2,130	$	1,408	+51

Identifiable assets:
Agriculture and turf						$	9,399	$	7,255	+30
Construction and forestry						2,735		2,186		+25
Financial services *						29,236		26,707		+9
Corporate						5,765		5,662		+2
Total assets						$	47,135	$	41,810	+13

Intersegment sales and revenues:
Agriculture and turf net sales	$	26	$	16	+63	$	71	$	42	+69
Construction and forestry net sales	4		3		+33	15		6		+150
Financial services *	57		62		-8	164		173		-5

Equipment operations outside the U.S. and Canada:
Net sales	$	3,364	$	2,255	+49	$	8,860	$	6,307	+40
Operating profit	300		208		+44	848		533		+59

* 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:

	Years
	2010		2009
Financial Services
Revenues	$	2,073	$	2,029
Intersegment revenues	224		255
Operating profit	499		242
Identifiable assets	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:

	July 31, 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	$	94	$	64	$	25	$	183
Construction and forestry	49		25		13		87
Other:
Agriculture and turf	25		11		21		57
Construction and forestry	13		4		6		23
Total	$	181	$	104	$	65	$	350

* 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	$	183	$	160	$	13,772	$	14,115
Construction and forestry	87		19		1,222		1,328
Recreational products					4		4
Other:
Agriculture and turf	57		17		5,650		5,724
Construction and forestry	23		8		933		964
Total	$	350	$	204	$	21,581	22,135
Less allowance for doubtful receivables							217
Total financing receivables - net							$	21,918

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

	Three Months Ended
	July 31, 2011
	Retail Notes		Revolving Charge Accounts		Other		Total
Allowance:
Balance, beginning of period	$	143	$	44	$	34	$	221
Provision (credit)	(3)		3		3		3
Write-offs	(4)		(11)		(2)		(17)
Recoveries	2		6		1		9
Other changes *	1						1
Balance, end of period	$	139	$	42	$	36	$	217

	Nine Months Ended
	July 31, 2011
Allowance:
Balance, beginning of period	$	144	$	44	$	37	$	225
Provision	5		8		2		15
Write-offs	(24)		(31)		(6)		(61)
Recoveries	9		21		1		31
Other changes *	5				2		7
Balance, end of period	$	139	$	42	$	36	$	217
Balance individually evaluated	$	1			$	2	$	3
Balance collectively evaluated	$	138	$	42	$	34	$	214

Financing receivables:
Balance, end of period	$	15,447	$	2,532	$	4,156	$	22,135
Balance individually evaluated	$	17			$	11	$	28
Balance collectively evaluated	$	15,430	$	2,532	$	4,145	$	22,107

* 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:

	July 31, 2011
	Recorded Investment		Unpaid Principal Balance		Specific Allowance		Average Recorded Investment
Receivables with specific allowance: *
Retail notes	$	2	$	2	$	1	$	2
Operating loans	2		2		2		4
Wholesale notes							1
Financing leases	1		1				1
Total	5		5		3		8

Receivables without a specific allowance:
Retail notes	12		12				11
Financing leases	1		1				1
Total	$	18	$	18	$	3	$	20
Agriculture and turf	$	10	$	10	$	3	$	12
Construction and forestry	$	8	$	8			$	8

* 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 included in “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 securitized, allowance for credit losses and other assets) of the consolidated SPEs totaled $1,746 million, $1,739 million and $1,850 million at July 31, 2011, October 31, 2010 and July 31, 2010, respectively. The liabilities (short-term securitization borrowings and accrued interest) of these SPEs totaled $1,622 million, $1,654 million and $1,765 million at July 31, 2011, October 31, 2010 and July 31, 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 securitized, allowance for credit losses and other assets) of $205 million and liabilities (short-term securitization borrowings and accrued interest) of $190 million at July 31, 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 securitized, allowance for credit losses and other assets) of $613 million, $589 million and $877 million at July 31, 2011, October 31, 2010 and July 31, 2010, respectively. The liabilities (short-term borrowings and accrued interest) related to these conduits were $570 million, $557 million and $815 million at July 31, 2011, October 31, 2010 and July 31, 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:

		July 31, 2011
Carrying value of liabilities		$ 570
Maximum exposure to loss		613

The total assets of unconsolidated VIEs related to securitizations were approximately $22 billion at July 31, 2011.

The components of consolidated restricted assets related to secured borrowings in securitization transactions follow in millions of dollars:

	July 31 2011			October 31 2010			July 31 2010
Financing receivables securitized (retail notes)	$	2,505		$	2,265		$	2,663
Allowance for credit losses	(24		)	(27		)	(31		)
Other assets	83			90			95
Total restricted securitized assets	$	2,564		$	2,328		$	2,727

The components of consolidated secured borrowings and other liabilities related to securitizations follow in millions of dollars:

	July 31 2011		October 31 2010		July 31 2010
Short-term securitization borrowings	$	2,381	$	2,209	$	2,577
Accrued interest on borrowings	1		2		3
Total liabilities related to restricted securitized assets	$	2,382	$	2,211	$	2,580

The secured borrowings related to these restricted securitized retail notes are obligations that are payable as the retail notes are liquidated. Repayment of the secured borrowings depends primarily on cash flows generated by the restricted assets. Due to the Company’s short-term credit rating, cash collections from these restricted assets are not required to be placed into a restricted collection account until immediately prior to the time payment is required to the secured creditors. At July 31, 2011, the maximum remaining term of all restricted securitized retail notes was approximately six years.

(12) Most inventories owned by Deere & Company and its U.S. equipment subsidiaries are valued at cost, on the “last-in, first-out” (LIFO) method. If all of the Company’s inventories had been valued on a “first-in, first-out” (FIFO) method, estimated inventories by major classification in millions of dollars would have been as follows:

	July 31 2011		October 31 2010		July 31 2010
Raw materials and supplies	$	1,628	$	1,201	$	1,082
Work-in-process	567		483		454
Finished goods and parts	3,954		2,777		2,975
Total FIFO value	6,149		4,461		4,511
Less adjustment to LIFO basis	1,461		1,398		1,336
Inventories	$	4,688	$	3,063	$	3,175

(13) The changes in amounts of goodwill by operating segments were as follows in millions of dollars:

	Agriculture and Turf			Construction and Forestry			Total
Balance October 31, 2009:
Goodwill	$	698		$	628		$	1,326
Less accumulated impairment losses	289						289
Goodwill-net	409			628			1,037

Translation adjustments	(4		)	(36		)	(40		)
Other	1			(5		)	(4		)

Balance July 31, 2010:
Goodwill	695			587			1,282
Less accumulated impairment losses	289						289
Goodwill-net	$	406		$	587		$	993

Balance October 31, 2010:
Goodwill	$	705		$	610		$	1,315
Less accumulated impairment losses	316						316
Goodwill-net	389			610			999

Translation adjustments	6			20			26
Other	(2		)				(2		)