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 January 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

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	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 January 31, 2014, 369,701,689 shares of common stock, $1 par value, of the registrant were outstanding.

Index to Exhibits: Page 48

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

DEERE & COMPANY
STATEMENT OF CONSOLIDATED INCOME
For the Three Months Ended January 31, 2014 and 2013

(In millions of dollars and shares except per share amounts) Unaudited
	2014		2013
Net Sales and Revenues
Net sales	$	6,948.5	$	6,792.8
Finance and interest income	531.5		501.0
Other income	174.0		127.6
Total	7,654.0		7,421.4

Costs and Expenses
Cost of sales	5,195.5		5,014.8
Research and development expenses	323.7		356.5
Selling, administrative and general expenses	765.9		781.5
Interest expense	171.7		180.1
Other operating expenses	232.3		142.4
Total	6,689.1		6,475.3

Income of Consolidated Group before Income Taxes	964.9		946.1
Provision for income taxes	280.5		289.0
Income of Consolidated Group	684.4		657.1
Equity in loss of unconsolidated affiliates	(3.1)		(7.5)
Net Income	681.3		649.6
Less: Net income (loss) attributable to noncontrolling interests	.2		(.1)
Net Income Attributable to Deere & Company	$	681.1	$	649.7

Per Share Data
Basic	$	1.83	$	1.67
Diluted	$	1.81	$	1.65

Average Shares Outstanding
Basic	371.9		388.4
Diluted	375.4		393.0

See Condensed Notes to Interim Consolidated Financial Statements.

DEERE & COMPANY
STATEMENT OF CONSOLIDATED COMPREHENSIVE INCOME
For the Three Months Ended January 31, 2014 and 2013

(In millions of dollars) Unaudited
	2014		2013

Net Income	$	681.3	$	649.6

Other Comprehensive Income (Loss), Net of Income Taxes
Retirement benefits adjustment	50.1		70.1
Cumulative translation adjustment	(168.0)		20.3
Unrealized gain on derivatives	2.9		3.8
Unrealized loss on investments	(1.3)		(2.1)
Other Comprehensive Income (Loss), Net of Income Taxes	(116.3)		92.1

Comprehensive Income of Consolidated Group	565.0		741.7
Less: Comprehensive income attributable to noncontrolling interests	.2
Comprehensive Income Attributable to Deere & Company	$	564.8	$	741.7

See Condensed Notes to Interim Consolidated Financial Statements.

DEERE & COMPANY
CONDENSED CONSOLIDATED BALANCE SHEET

(In millions of dollars) Unaudited
	January 31		October 31		January 31
	2014		2013		2013
Assets
Cash and cash equivalents	$	3,188.6	$	3,504.0	$	3,672.1
Marketable securities	1,438.4		1,624.8		1,375.6
Receivables from unconsolidated affiliates	35.2		31.2		44.6
Trade accounts and notes receivable - net	3,716.8		3,758.2		3,926.4
Financing receivables - net	25,242.3		25,632.7		22,070.7
Financing receivables securitized - net	3,490.9		4,153.1		3,032.9
Other receivables	1,157.6		1,464.0		1,280.2
Equipment on operating leases - net	3,026.0		3,152.2		2,452.3
Inventories	5,554.6		4,934.7		6,242.7
Property and equipment - net	5,351.0		5,466.9		5,042.6
Investments in unconsolidated affiliates	297.5		221.4		201.5
Goodwill	834.6		844.8		934.0
Other intangible assets - net	74.6		77.1		98.5
Retirement benefits	583.5		551.1		22.8
Deferred income taxes	2,323.4		2,325.4		3,311.6
Other assets	1,344.2		1,274.7		1,461.1
Assets held for sale			505.0
Total Assets	$	57,659.2	$	59,521.3	$	55,169.6

Liabilities and Stockholders’ Equity
Short-term borrowings	$	8,657.3	$	8,788.9	$	7,331.7
Short-term securitization borrowings	3,490.8		4,109.1		3,043.9
Payables to unconsolidated affiliates	89.1		106.9		70.5
Accounts payable and accrued expenses	7,330.0		8,973.6		7,200.3
Deferred income taxes	154.8		160.3		169.4
Long-term borrowings	22,265.2		21,577.7		22,170.2
Retirement benefits and other liabilities	5,414.2		5,416.7		7,698.1
Liabilities held for sale			120.4
Total liabilities	47,401.4		49,253.6		47,684.1

Commitments and contingencies (Note 14)

Common stock, $1 par value (issued shares at January 31, 2014 – 536,431,204)	3,571.3		3,524.2		3,434.3
Common stock in treasury	(10,643.1)		(10,210.9)		(8,817.2)
Retained earnings	20,136.9		19,645.6		17,346.1
Accumulated other comprehensive income (loss)	(2,809.4)		(2,693.1)		(4,479.5)
Total Deere & Company stockholders’ equity	10,255.7		10,265.8		7,483.7
Noncontrolling interests	2.1		1.9		1.8
Total stockholders’ equity	10,257.8		10,267.7		7,485.5
Total Liabilities and Stockholders’ Equity	$	57,659.2	$	59,521.3	$	55,169.6

See Condensed Notes to Interim Consolidated Financial Statements.

DEERE & COMPANY
STATEMENT OF CONSOLIDATED CASH FLOWS
For the Three Months Ended January 31, 2014 and 2013

(In millions of dollars) Unaudited
	2014		2013
Cash Flows from Operating Activities
Net income	$	681.3	$	649.6
Adjustments to reconcile net income to net cash used for operating activities:
Provision (credit) for credit losses	2.4		(.5)
Provision for depreciation and amortization	343.1		277.1
Impairment charges	26.3
Share-based compensation expense	23.2		22.3
Undistributed earnings of unconsolidated affiliates	3.0		15.6
Credit for deferred income taxes	(8.6)		(20.6)
Changes in assets and liabilities:
Trade, notes and financing receivables related to sales	126.7		94.9
Insurance receivables	101.9		338.0
Inventories	(836.8)		(1,169.0)
Accounts payable and accrued expenses	(1,387.1)		(1,539.1)
Accrued income taxes payable/receivable	137.5		146.6
Retirement benefits	53.4		96.2
Other	(12.5)		(160.5)
Net cash used for operating activities	(746.2)		(1,249.4)

Cash Flows from Investing Activities
Collections of receivables (excluding receivables related to sales)	4,660.7		4,341.9
Proceeds from maturities and sales of marketable securities	403.6		215.4
Proceeds from sales of equipment on operating leases	276.4		249.4
Proceeds from sales of businesses, net of cash sold	303.7
Cost of receivables acquired (excluding receivables related to sales)	(4,190.1)		(3,933.6)
Purchases of marketable securities	(222.4)		(125.1)
Purchases of property and equipment	(250.7)		(294.0)
Cost of equipment on operating leases acquired	(251.6)		(197.6)
Other	(56.3)		(39.5)
Net cash provided by investing activities	673.3		216.9

Cash Flows from Financing Activities
Increase (decrease) in total short-term borrowings	(736.7)		691.9
Proceeds from long-term borrowings	2,241.1		877.8
Payments of long-term borrowings	(1,100.0)		(1,379.5)
Proceeds from issuance of common stock	54.3		117.6
Repurchases of common stock	(477.3)		(96.4)
Dividends paid	(192.5)		(178.7)
Excess tax benefits from share-based compensation	14.6		35.4
Other	(13.0)		(20.4)
Net cash provided by (used for) financing activities	(209.5)		47.7

Effect of Exchange Rate Changes on Cash and Cash Equivalents	(33.0)		4.7

Net Decrease in Cash and Cash Equivalents	(315.4)		(980.1)
Cash and Cash Equivalents at Beginning of Period	3,504.0		4,652.2
Cash and Cash Equivalents at End of Period	$	3,188.6	$	3,672.1

See Condensed Notes to Interim Consolidated Financial Statements.

DEERE & COMPANY

STATEMENT OF CHANGES IN CONSOLIDATED STOCKHOLDERS’ EQUITY

For the Three Months Ended January 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 (loss)	649.6								649.7						(.1		)
Other comprehensive income	92.1											92.0			.1
Repurchases of common stock	(96.4		)			(96.4		)
Treasury shares reissued	93.0					93.0
Dividends declared	(186.4		)						(178.9		)				(7.5		)
Deconsolidation of variable interest entity	(10.6		)												(10.6		)
Stock options and other	82.2			82.1					.1
Balance January 31, 2013	$	7,485.5		$	3,434.3	$	(8,817.2	)	$	17,346.1		$	(4,479.5	)	$	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	681.3								681.1						.2
Other comprehensive loss	(116.3		)									(116.3		)
Repurchases of common stock	(477.3		)			(477.3		)
Treasury shares reissued	45.1					45.1
Dividends declared	(189.8		)						(189.8		)
Stock options and other	47.1			47.1
Balance January 31, 2014	$	10,257.8		$	3,571.3	$	(10,643.1	)	$	20,136.9		$	(2,809.4	)	$	2.1

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 $116 million and $87 million in the first three months of 2014 and 2013, respectively. The Company also had accounts payable related to purchases of property and equipment of approximately $50 million and $57 million at January 31, 2014 and 2013, respectively.

(3) New accounting standards adopted in the first three 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.

(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		(168)		(3)		(1)		(160)
Amounts reclassified from accumulated other comprehensive income	38				6				44
Net current period other comprehensive income (loss)	50		(168)		3		(1)		(116)
Balance January 31, 2014	$	(2,759)	$	(55)			$	5	$	(2,809)

The details about reclassifications of gains (losses) out of accumulated other comprehensive income (loss) in millions of dollars follows:

	Three Months Ended January 31, 2014
Loss on derivatives
Interest rate contracts – Interest expense	$	(4)
Foreign exchange contracts – Other expense	(5)
Total	(9)
Tax credit	3
After-tax amount	(6)

Amortization of retirement benefit adjustments *
Pensions
Actuarial losses	(43)
Prior service costs	(6)
Settlements/curtailments	(2)
Health care and life insurance
Actuarial losses	(9)
Prior service credit	1
Total	(59)
Tax credit	21
After-tax amount	(38)

Total after-tax reclassifications for the period	$	(44)

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

The items included in other comprehensive income (loss) and the related tax effects in millions of dollars follow:

Three Months Ended January 31, 2014	Before Tax Amount			Tax (Expense) Credit			After Tax Amount
Net unrealized gain on retirement benefits adjustment	$	77.8		$	(27.7	)	$	50.1
Cumulative translation adjustment	(169.4		)	1.4			(168.0		)
Net unrealized gain on derivatives	4.5			(1.6		)	2.9
Net unrealized loss on investments	(2.1		)	.8			(1.3		)
Total other comprehensive income (loss)	$	(89.2	)	$	(27.1	)	$	(116.3	)

Three Months Ended January 31, 2013	Before Tax Amount			Tax (Expense) Credit			After Tax Amount
Net unrealized gain on retirement benefits adjustment	$	112.2		$	(42.1	)	$	70.1
Cumulative translation adjustment	13.2			7.1			20.3
Net unrealized gain on derivatives	5.8			(2.0		)	3.8
Net unrealized loss on investments	(3.4		)	1.3			(2.1		)
Total other comprehensive income (loss)	$	127.8		$	(35.7	)	$	92.1

In the first quarter of 2014, the noncontrolling interests’ comprehensive income was $.2 million, which consisted of net income of $.2 million. In the first quarter of 2013, the noncontrolling interests’ comprehensive income was none, which consisted of a net loss of $(.1) million and cumulative translation adjustments of $.1 million.

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

	Three Months Ended January 31
	2014		2013
Dividends declared	$	.51	$	.46
Dividends paid	$	.51	$	.46

(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 January 31
	2014		2013
Net income attributable to Deere & Company	$	681.1	$	649.7
Less income allocable to participating securities	.2		.1
Income allocable to common stock	$	680.9	$	649.6
Average shares outstanding	371.9		388.4
Basic per share	$	1.83	$	1.67
Average shares outstanding	371.9		388.4
Effect of dilutive share-based compensation	3.5		4.6
Total potential shares outstanding	375.4		393.0
Diluted per share	$	1.81	$	1.65

During the first quarter of 2014 and 2013, 2.4 million shares and 2.5 million shares, respectively, 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.

(7) The Company has several defined benefit pension plans and defined 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 January 31
		2014			2013
Service cost	$	61		$	67
Interest cost	119			110
Expected return on plan assets	(193		)	(194		)
Amortization of actuarial loss	43			65
Amortization of prior service cost	6			8
Settlements/curtailments	2
Net cost	$	38		$	56

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 January 31
	2014			2013
Service cost	$	11		$	14
Interest cost	66			64
Expected return on plan assets	(18		)	(21		)
Amortization of actuarial loss	9			36
Amortization of prior service credit	(1		)	(1		)
Net cost	$	67		$	92

During the first quarter of 2014, the Company contributed approximately $22 million to its pension plans and $7 million to its other postretirement benefit plans. The Company presently anticipates contributing an additional $70 million to its pension plans and $19 million to its other postretirement benefit plans during 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 January 31, 2014 were $257 million, compared to $272 million at October 31, 2013. The liability at January 31, 2014 consisted of approximately $51 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 to the unrecognized tax benefits for the first three months of 2014 were not significant. The Company expects that any reasonably possible change in the amounts of unrecognized tax benefits in the next 12 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 January 31
							%
	2014			2013			Change
Net sales and revenues:
Agriculture and turf	$	5,596		$	5,491		+2
Construction and forestry	1,353			1,302			+4
Total net sales	6,949			6,793			+2
Financial services	587			527			+11
Other revenues	118			101			+17
Total net sales and revenues	$	7,654		$	7,421		+3
Operating profit *
Agriculture and turf	$	797		$	766		+4
Construction and forestry	94			71			+32
Financial services	182			197			-8
Total operating profit	1,073			1,034			+4
Reconciling items **	(112		)	(95		)	+18
Income taxes	(280		)	(289		)	-3
Net income attributable to Deere & Company	$	681		$	650		+5

Intersegment sales and revenues:
Agriculture and turf net sales	$	20		$	19		+5
Construction and forestry net sales	1
Financial services	46			45			+2

Equipment operations outside the U.S. and Canada:
Net sales	$	2,608		$	2,570		+1
Operating profit	211			140			+51

	January 31 2014	October 31 2013
Identifiable assets:
Agriculture and turf	$ 10,851	$ 10,799
Construction and forestry	3,307	3,461	-4
Financial services	37,698	38,646	-2
Corporate	5,803	6,615	-12
Total assets	$ 57,659	$ 59,521	-3

* 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:

	January 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	$	103	$	39	$	26	$	168
Construction and forestry	51		19		10		80
Other:
Agriculture and turf	28		10		4		42
Construction and forestry	12		4		3		19
Total	$	194	$	72	$	43	$	309

	Total Past Due		Total Non- Performing		Current		Total Financing Receivables
Retail Notes:
Agriculture and turf	$	168	$	106	$	18,802	$	19,076
Construction and forestry	80		14		2,017		2,111
Other:
Agriculture and turf	42		13		6,614		6,669
Construction and forestry	19		3		1,022		1,044
Total	$	309	$	136	$	28,455	28,900
Less allowance for credit losses							167
Total financing receivables - net							$	28,733

	October 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	$	75	$	26	$	20	$	121
Construction and forestry	39		14		9		62
Other:
Agriculture and turf	28		9		5		42
Construction and forestry	12		4		3		19
Total	$	154	$	53	$	37	$	244

	Total Past Due		Total Non- Performing		Current		Total Financing Receivables
Retail Notes:
Agriculture and turf	$	121	$	102	$	18,942	$	19,165
Construction and forestry	62		12		1,921		1,995
Other:
Agriculture and turf	42		13		7,613		7,668
Construction and forestry	19		3		1,109		1,131
Total	$	244	$	130	$	29,585	29,959
Less allowance for credit losses							173
Total financing receivables - net							$		29,786

	January 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	$	77	$	25	$	19	$	121
Construction and forestry	40		17		9		66
Other:
Agriculture and turf	23		7		3		33
Construction and forestry	11		3		1		15
Total	$	151	$	52	$	32	$	235

	Total Past Due		Total Non- Performing		Current		Total Financing Receivables
Retail Notes:
Agriculture and turf	$	121	$	112	$	16,546	$	16,779
Construction and forestry	66		14		1,591		1,671
Other:
Agriculture and turf	33		10		5,675		5,718
Construction and forestry	15		2		1,094		1,111
Total	$	235	$	138	$	24,906	25,279
Less allowance for credit losses							175
Total financing receivables - net							$	25,104

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

	Retail Notes		Revolving Charge Accounts		Other		Total

January 31, 2014
Allowance:
Beginning of period balance	$	101	$	41	$	31	$	173
Provision	1		1				2
Write-offs	(3)		(5)				(8)
Recoveries	2		3				5
Translation adjustments	(4)				(1)		(5)
End of period balance *	$	97	$	40	$	30	$	167

Financing receivables:
End of period balance	$	21,187	$	1,801	$	5,912	$	28,900
Balance individually evaluated	$	14			$	26	$	40

January 31, 2013
Allowance:
Beginning of period balance	$	110	$	40	$	27	$	177
Provision	1						1
Write-offs	(5)		(4)				(9)
Recoveries	2		4				6
End of period balance *	$	108	$	40	$	27	$	175

Financing receivables:
End of period balance	$	18,450	$	1,799	$	5,030	$	25,279
Balance individually evaluated	$	11	$	1	$	1	$	13

* Individual allowances were not significant.

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 that are impaired are generally classified as non-performing.

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

	Recorded Investment		Unpaid Principal Balance		Specific Allowance		Average Recorded Investment

January 31, 2014 *
Receivables with specific allowance ****	$	18	$	18	$	4	$	18
Receivables without a specific allowance ***	7		6				7
Total	$	25	$	24	$	4	$	25
Agriculture and turf	$	22	$	22	$	4	$	23
Construction and forestry	$	3	$	2			$	2

October 31, 2013 *
Receivables with specific allowance **	$	18	$	18	$	4	$	19
Receivables without a specific allowance ***	8		8				8
Total	$	26	$	26	$	4	$	27
Agriculture and turf	$	23	$	23	$	4	$	24
Construction and forestry	$	3	$	3			$	3

January 31, 2013 *
Receivables with specific allowance ***	$	1	$	1			$	1
Receivables without a specific allowance ***	9		9				9
Total	$	10	$	10			$	10
Agriculture and turf	$	6	$	6			$	6
Construction and forestry	$	4	$	4			$	4

* Finance income recognized was not material.

** Primarily operating loans and retail notes.

*** Primarily retail notes.

**** Primarily operating loans.

A troubled debt restructuring is generally the modification of debt in which a creditor grants a concession it would not otherwise consider to a debtor that is experiencing financial difficulties. These modifications may include a reduction of the stated interest rate, an extension of the maturity dates, a reduction of the face amount or maturity amount of the debt, or a reduction of accrued interest. During the first quarter of 2014, the Company identified six financing receivable contracts, primarily retail notes, as troubled debt restructurings with aggregate balances of $.2 million pre-modification and $.2 million post-modification. During the first quarter of 2013, there were 26 financing receivable contracts, primarily retail notes, with $1.3 million pre-modification and $1.1 million post-modification balances. During these same periods, there were no significant troubled debt restructurings that subsequently defaulted and were written off. At January 31, 2014, the Company had no commitments to lend additional funds to borrowers whose accounts were modified in troubled debt restructurings.

(11) Securitization of financing receivables:

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

In securitizations of retail notes related to secured borrowings, the retail notes are transferred to certain SPEs or to a non-VIE banking operation, which in turn issue debt to investors. The resulting secured borrowings are recorded as “Short-term securitization borrowings” on the balance sheet. The securitized retail notes are recorded as “Financing receivables securitized – net” on the balance sheet. The total restricted assets on the balance sheet related to these securitizations include the financing receivables securitized less an allowance for credit losses, and other assets primarily representing restricted cash. For those securitizations in which retail notes are transferred into SPEs, the SPEs supporting the secured borrowings are consolidated unless the Company does not have both the power to direct the activities that most significantly impact the SPEs’ economic performance and the obligation to absorb losses or the right to receive benefits that could potentially be significant to the SPEs. No additional support to these SPEs beyond what was previously contractually required has been provided during the reporting periods.

In certain securitizations, the Company consolidates the SPEs since it has both the power to direct the activities that most significantly impact the SPEs’ economic performance through its role as servicer of all the receivables held by the SPEs, and the obligation through variable interests in the SPEs to absorb losses or receive benefits that could potentially be significant to the SPEs. The restricted assets (retail notes securitized, allowance for credit losses and other assets) of the consolidated SPEs totaled $2,223 million, $2,626 million and $1,970 million at January 31, 2014, October 31, 2013 and January 31, 2013, respectively. The liabilities (short-term securitization borrowings and accrued interest) of these SPEs totaled $2,159 million, $2,547 million and $1,915 million at January 31, 2014, October 31, 2013 and January 31, 2013, 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 banking 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 $296 million, $353 million and $248 million at January 31, 2014, October 31, 2013 and January 31, 2013, respectively. The liabilities (short-term securitization borrowings and accrued interest) were $289 million, $338 million and $245 million at January 31, 2014, October 31, 2013 and January 31, 2013, respectively.

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 $1,069 million, $1,274 million and $898 million at January 31, 2014, October 31, 2013 and January 31, 2013, respectively. The liabilities (short-term securitization borrowings and accrued interest) related to these conduits were $1,044 million, $1,225 million and $885 million at January 31, 2014, October 31, 2013 and January 31, 2013, 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:

	January 31, 2014
Carrying value of liabilities	$	1,044
Maximum exposure to loss		1,069

The total assets of unconsolidated VIEs related to securitizations were approximately $43 billion at January 31, 2014.

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

	January 31 2014		October 31 2013		January 31 2013
Financing receivables securitized (retail notes)	$	3,502	$	4,167	$	3,047
Allowance for credit losses	(11)		(14)		(14)
Other assets	97		100		83
Total restricted securitized assets	$	3,588	$	4,253	$	3,116

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

	January 31 2014		October 31 2013		January 31 2013
Short-term securitization borrowings	$	3,491	$	4,109	$	3,044
Accrued interest on borrowings	1		1		1
Total liabilities related to restricted securitized assets	$	3,492	$	4,110	$	3,045

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 January 31, 2014, 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:

	January 31 2014		October 31 2013		January 31 2013
Raw materials and supplies	$	2,108	$	1,954	$	2,045
Work-in-process	847		753		815
Finished goods and parts	4,151		3,757		4,775
Total FIFO value	7,106		6,464		7,635
Less adjustment to LIFO value	1,551		1,529		1,392
Inventories	$	5,555	$	4,935	$	6,243

(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, 2012:
Goodwill	$	686	$	584	$	1,270
Less accumulated impairment losses	349				349
Goodwill - net	337		584		921

Translation adjustments	1		12		13

Balance January 31, 2013:
Goodwill	687		596		1,283
Less accumulated impairment losses	349				349
Goodwill - net	$	338	$	596	$	934

Balance October 31, 2013:
Goodwill	$	302	$	603	$	905
Less accumulated impairment losses *	60				60
Goodwill - net	242		603		845

Translation adjustments	(3)		(7)		(10)

Balance January 31, 2014:
Goodwill	299		596		895
Less accumulated impairment losses	60				60
Goodwill - net	$	239	$	596	$	835

* Accumulated impairment losses were reduced by $289 million related to Landscapes reclassification to held for sale (see Note 18).

The components of other intangible assets were as follows in millions of dollars:

	Useful Lives *	January 31		October 31		January 31
	Years	2014		2013		2013
Amortized intangible assets:
Customer lists and relationships	15	$	20	$	20	$	99
Technology, patents, trademarks and other	19	88		88		110
Total at cost		108		108		209
Less accumulated amortization **		37		35		114
Total		71		73		95
Unamortized intangible assets:
Licenses		4		4		4
Other intangible assets - net		$	75	$	77	$	99

* Weighted-averages

** Accumulated amortization at January 31, 2014, October 31, 2013 and January 31, 2013 for customer lists and relationships totaled $8 million, $8 million and $64 million and technology, patents, trademarks and other totaled $29 million, $27 million and $50 million, respectively.

The amortization of other intangible assets in the first quarter of 2014 and 2013 was $2 million and $7 million, respectively. The estimated amortization expense for the next five years is as follows in millions of dollars: remainder of 2014 - $8, 2015 - $10, 2016 - $9, 2017 - $9 and 2018 - $5.

(14) Commitments and contingencies:

The Company generally determines its total warranty liability by applying historical claims rate experience to the estimated amount of equipment that has been sold and is still under warranty based on dealer inventories and retail sales. The historical claims rate is primarily determined by a review of five-year claims costs and current quality developments.

The premiums for extended warranties are primarily recognized in income in proportion to the costs expected to be incurred over the contract period. These unamortized extended warranty premiums (deferred revenue) included in the following table totaled $360 million and $309 million at January 31, 2014 and 2013, respectively.

A reconciliation of the changes in the warranty liability and unearned premiums in millions of dollars follows:

	Three Months Ended January 31
	2014		2013
Beginning of period balance	$	1,164	$	1,025
Payments	(189)		(166)
Amortization of premiums received	(28)		(28)
Accruals for warranties	185		212
Premiums received	46		44
Foreign exchange	(6)		4
End of period balance	$	1,172	$	1,091

At January 31, 2014, the Company had approximately $282 million of guarantees issued primarily to banks outside the U.S. and Canada related to third-party receivables for the retail financing of John Deere equipment. The Company may recover a portion of any required payments incurred under these agreements from repossession of the equipment collateralizing the receivables. At January 31, 2014, the Company had an accrued liability of approximately $6 million under these agreements. The maximum remaining term of the receivables guaranteed at January 31, 2014 was approximately six years.

At January 31, 2014, the Company had commitments of approximately $316 million for the construction and acquisition of property and equipment. Also, at January 31, 2014, the Company had restricted assets of $105 million, primarily as collateral for borrowings and restricted other assets. See Note 11 for additional restricted assets associated with borrowings related to securitizations.

The Company also had other miscellaneous contingent liabilities totaling approximately $50 million at January 31, 2014, for which it believes the probability for payment is substantially remote. The accrued liability for these contingencies was not material at January 31, 2014.

The Company is subject to various unresolved legal actions which arise in the normal course of its business, the most prevalent of which relate to product liability (including asbestos related liability), retail credit, software licensing, patent, trademark and environmental matters. The Company believes the reasonably possible range of losses for these unresolved legal actions in addition to the amounts accrued would not have a material effect on its consolidated financial statements.

(15) The fair values of financial instruments that do not approximate the carrying values in millions of dollars follow:

	January 31, 2014				October 31, 2013				January 31, 2013
	Carrying Value		Fair Value *		Carrying Value		Fair Value *		Carrying Value		Fair Value *
Financing receivables - net	$	25,242	$	25,129	$	25,633	$	25,572	$	22,071	$	22,144
Financing receivables securitized - net	3,491		3,463		4,153		4,124		3,033		3,032
Short-term securitization borrowings	3,491		3,492		4,109		4,113		3,044		3,050

Long-term borrowings due within one year: