FINANCIAL

STATEMENT
ANALYSIS
Group No. 1

Akansha Agarwal
14-163
Kavya Gupta
14-112
Iha Bansal
14-109
Mounika T
14-116

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INCOME STATEMENT ANALYSIS

Revenues and Growth
40000

23% 36,083

35000
30000
25000

37,715

35,990

20%

32,013
26,005
13%

25%

15%

13%

10%

20000
5%

5%

15000

0%

10000
-5%

5000
0
2011
2012
Revenues

2013
Growth

2014

Reduction in Operating Revenues

Mainly due to Foreign currency translation, lower shipment volumes
(weaker outlook of the global farm economy reducing the demand for
machinery), part offset by price increase
Two subsidiaries sold in 2013, John Deere Water and John Deere
Landscapes, acquired Bauerbuiilt Manufacturing inclusive in 2013
Increase in Finance division revenue
The improvement was due primarily to growth in the credit portfolio, a
more favorable effective tax rate, partially offset by lower crop
insurance margins, higher selling, administrative and general expenses
and a higher provision for credit losses

Income

Balance Sheet

25%

26%

26%

26%

16%

17%

16%

7%

8%

8%

28%

26%

20%
15%
10%

18%

17%

9%

8%

5%

-5%
-10%

2010

30%

Cash Flow

0%
2010

2011
Gross Margin

2012
EBITDA margin

2013

2014

NI Margin

Reduction in Gross Profit Margin (2014)

COGS remaining constant, gross profit margin has also reduced,
partially offset by the increase in price realisation (2%)
Still higher (25%) than that of largest firm in the industry
(Caterpillar)
Reduction in EBITDA margin (2014)
Increase in R&D expense due to higher depreciation, higher
insurance claims, write-down
Offset by fall in SG&A expense (due to Water and Landscapes
subsidiaries sold off)

Comparable

Share price
movement

Debt holder
viewpoint

BALANCE SHEET ANALYSIS

Decrease in Inventory from 2012 to 2014

Company transferred inventory to equipment on
operating leases of $794 million, $659 million and
$563 million in 2014, 2013 and 2012
Fluctuation in Accounts receivable value
The value of accounts receivable varies widely from
year to year owing to the companys practice of
selling receivables lying on its books to its financial
services company.
Increase in Days payable outstanding
John Deere maintains strategic sourcing models to
meet its production needs and build upon long- term
supplier relationships.
Uses a variety of agreements with suppliers to
minimize other supply- related risks.
Negative Cash conversion cycle
Indicates that company uses external cash to source
operations.
Mainly due to positive relationships with suppliers
Income

Balance Sheet

Cash Flow

Comparable

Share price
movement

Debt holder
viewpoint

CASH FLOW STATEMENT ANALYSIS

Income

Balance Sheet

Cash Flow

Comparable

Provision for credit losses &

Change in Acc Rec:
Most of the receivables have been
securitized in 2012 leading to
change in Accounts Receivables.
The future outlook reflected
improvement due to continued
growth in the portfolio, partially
offset by an increase in the
provision for credit losses from the
low level in 2013.
Cash Acquisition:
-$83.5 Mn cash acquisition of Bauer
Built Manufacturing company,
manufacturer of planters based in
Paton, Iowa in 2013
Divestitures:
High value of divestitures in 2014
due to disposition of CD&R worth
$505 mn assets and $120 million
liabilities .
Issuance/Repurchase of Common
stock:
Share price
Debt holder
Basic
no. of shares shows
a
movement
viewpoint

COMPS ANALYSIS FINANCIAL RATIOS

Toro Company has the best ratios amongst all competitiors; however their profitable product lines are different
from John Deere.
Industry leader and the closest firm to John Deere in terms of size is Caterpillar. Most of the ratios are
comparable between the two firms with Deere & Co. outperforming Caterpillar on some of the parameters.
John Deere is outperforming the industry median in aspects like accounts payable, cash conversion (lowest) and
inventory management.
The major concern facing the firm is high leverage; the company will require free cash
to holder
Shareflows
price of 6-7 yearsDebt
Income
Balance Sheet
Cash Flow
Comparable
movement
viewpoint
repay the debt taken on.

COMP GROWTH PROFILE

The growth has been negative for

the company mainly due to the
falling sales. This trend has been
constant throughout the industry
mainly due to the macroeconomic
factors.

Income

Balance Sheet

The net income for John

Deere is much less than
caterpillar due to the
lower shipment and
production volumes.

Cash Flow

The competitive analysis

shows that Toro has been
outperforming the rest of
its peers with very high
net income growth

Comparable

Share price
movement

Debt holder
viewpoint

SHARE PRICE MOVEMENT

The share price of Deere & Co. has delivered lower returns than the S&P 500 index over a 5 year
horizon.
However, it has outperformed its rival firm Caterpillar in terms of stock price over the
Share price
Debt holder
Income
Balance Sheet
Cash Flow
Comparable
corresponding period.
movement
viewpoint

VIEWPOINT OF A DEBT HOLDER

Debt servicing

The (EBITDA capex)/Interest

ratio -the interest coverage
ratio is quite high. So, although
the company has high leverage
(as per book value), still it has
good paying capacity. So, for a
debt holder, he can be assure
of principal payments

Income

Balance Sheet

The total debt to debt (book

value) is ~400% which is quite
high
But, the total debt to capital
(market cap) is 80% which is
within control

The Total debt to EBITDA ratio

is 6x, which is represents that
the company will take on an
average 6 years to pay off the
debt- which is quite high and
gives ample room to rethink

Cash Flow

Comparable

Share price
movement

Debt holder
viewpoint

VIEWPOINT OF A DEBT HOLDER

Debt servicing compared to peers

Income

Balance Sheet

Although, John Deer has better

debt servicing capacity
compared to the median of
peers, but still it requires more
no of years to repay the debt.
This is an alarming signal for
John Deer

Cash Flow

Comparable

Share price
movement

Debt holder
viewpoint