- Company has profitable quarter in face of global economic
slowdown. - Operations benefit from solid execution of plans to
curb costs and inventories. - Deere positioned to capitalize on
positive long-term trends. MOLINE, Ill. Aug. 19
/PRNewswire-FirstCall/ -- Deere & Company today announced
worldwide net income of $420.0 million, or $0.99 per share, for the
third quarter ended July 31, compared with $575.2 million, or $1.32
per share, for the same period last year. For the first nine months
of the year, net income was $1.096 billion, or $2.59 per share,
compared with $1.708 billion, or $3.89 per share, last year.
Worldwide net sales and revenues declined 24 percent, to $5.885
billion, for the third quarter and were down 15 percent to $17.778
billion for nine months compared with a year ago. Net sales of the
equipment operations were $5.283 billion for the quarter and
$16.030 billion for nine months, compared with $7.070 billion and
$19.070 billion last year. "John Deere has completed a solidly
profitable quarter in the face of persistent global economic
pressure and made further progress advancing its competitive
position throughout the world," said Samuel R. Allen, president and
chief executive officer. "We have seen continued benefit from
strength in the U.S. market for large farm machinery and from our
efforts to keep a tight rein on costs and inventories. Deere's
construction and forestry business, as an example, is successfully
executing carefully designed plans to adjust expenses and asset
levels in response to the severe decline in its markets," Allen
said. Summary of Operations Net sales of the worldwide equipment
operations decreased 25 percent for the quarter and 16 percent for
nine months. Sales included an unfavorable currency-translation
effect of 4 percent for the quarter and 5 percent for nine months
and price increases of 6 percent for both periods. Equipment net
sales in the United States and Canada declined 16 percent for the
quarter and 9 percent year to date. Net sales outside the United
States and Canada were down 37 percent for the quarter and 26
percent for nine months, with an unfavorable currency-translation
effect of 7 percent for the quarter and 11 percent year to date.
Deere's equipment operations reported operating profit of $452
million for the quarter and $1.387 billion for nine months,
compared with $818 million and $2.377 billion last year. The
deterioration in both periods primarily was due to lower shipment
and production volumes and the unfavorable effects of foreign
exchange, partially offset by improved price realization and lower
selling, administrative and general expenses. In addition, higher
raw-material costs affected nine-month results. Equipment
operations reported net income of $319 million for the quarter and
$879 million for nine months, compared with $479 million and $1.408
billion last year. The same operating factors mentioned above, in
addition to a lower current-year effective tax rate, had an impact
on both quarterly and nine-month results. The company's focus on
asset management continued to support its performance. Trade
receivables and inventories at the end of the quarter were $6.250
billion, or 28 percent of previous 12-month sales, compared with
$7.457 billion, or 30 percent of sales, a year ago. Financial
services reported net income of $102.1 million for the quarter and
$217.8 million for nine months compared with $83.4 million and
$267.5 million last year. Results were higher for the quarter
largely due to benefits from investment tax credits for wind energy
projects, foreign exchange gains and lower selling, administrative
and general expenses. Partially offsetting these factors were a
higher provision for credit losses and narrower financing spreads.
Nine-month net income was lower primarily due to a higher provision
for credit losses, narrower financing spreads and lower commissions
from crop insurance, partially offset by benefits from investment
tax credits and lower selling, administrative and general expenses.
Company Outlook & Summary Company equipment sales are projected
to be down about 21 percent for the full year and down about 34
percent for the fourth quarter, including a negative
currency-translation impact of about 4 percent for the year and
about 1 percent for the quarter. Deere's net income is anticipated
to be approximately $1.1 billion for 2009, despite the largest
expected single-year sales decline in at least 50 years. Affecting
fourth quarter results will be significant production cutbacks that
are being made in line with retail demand. The quarter also will
include costs for rationalizing operations, as previously
announced. In spite of present economic conditions, the company
believes underlying trends remain quite promising for its
businesses. "John Deere is well-positioned to respond to the
world's growing need for food, shelter, infrastructure and energy
with a wide range of advanced equipment and services," Allen said.
"Further, we're confident our ability to adjust production in
response to dynamic markets will help us come through today's
challenging times in a strong condition, ready to seize future
opportunities for growth." * * * Equipment Division Performance
Agriculture & Turf. Sales declined 21 percent for the quarter
and 9 percent for nine months largely due to lower shipment volumes
and the unfavorable effects of currency translation, partially
offset by improved price realization. Operating profit was $480
million for the quarter and $1.472 billion year to date, compared
with $725 million and $2.001 billion for the respective periods
last year. Operating profit was lower in both periods primarily due
to lower shipment and production volumes and unfavorable impacts of
foreign exchange, partially offset by improved price realization
and lower selling, administrative and general expenses. Higher
raw-material costs also had an unfavorable impact on the nine-month
results. Construction & Forestry. Construction and forestry
sales declined 47 percent for the quarter and 45 percent for nine
months, resulting in operating losses of $28 million for the
quarter and $85 million year to date. Last year the division had
operating profit of $93 million and $376 million for the same
periods. The profit decreases for both periods were primarily due
to significantly lower shipment and production volumes, partially
offset by lower selling, administrative and general expenses and
improved price realization. Higher raw-material costs also had an
unfavorable impact on year-to-date results. Market Conditions &
Outlook Agriculture & Turf. Full-year sales of the agriculture
and turf division are forecast to decrease by about 15 percent,
including a negative currency-translation impact of about 5
percent. At the beginning of the third quarter of 2009, the company
combined the agricultural equipment and commercial and consumer
equipment businesses. Voluntary employee separations related to the
new organizational structure resulted in pretax charges of $16
million in the third quarter and will be approximately $85 million
in the fourth quarter. Annual savings from the separation program
are expected to be approximately $50 million to $60 million in
2010. On an industry basis, farm machinery sales in the United
States and Canada are forecast to be down slightly for the year,
though sales of large tractors, combines, sprayers and seeding
equipment are expected to be higher. In other parts of the world,
industry farm-machinery sales in Western Europe are forecast to
decline 10 to 15 percent for the year while markets in Central
Europe and the Commonwealth of Independent States are expected to
be sharply lower. In South America, industry sales are projected to
decrease by 20 to 30 percent for the year. Industry sales of turf
equipment and compact utility tractors in the United States and
Canada are expected to be down about 20 percent. Construction &
Forestry. Deere's worldwide sales of construction and forestry
equipment are forecast to decline by about 47 percent for the year.
The decline is attributable to a slumping global economy,
historically low levels of U.S. construction activity, and further
deterioration in forestry markets worldwide. Credit. Full-year 2009
net income for Deere's credit operations is forecast to be
approximately $270 million. The forecast decrease from 2008
primarily is due to narrower financing spreads, a higher provision
for credit losses and lower commissions from crop insurance,
partially offset by benefits from investment tax credits related to
wind energy projects. John Deere Capital Corporation The following
is disclosed on behalf of the company's credit subsidiary, John
Deere Capital Corporation (JDCC), in connection with the disclosure
requirements applicable to its periodic issuance of debt securities
in the public market. JDCC's net income was $59.1 million for the
third quarter and $128.1 million year to date, compared with net
income of $70.1 million and $224.6 million for the respective
periods last year. Results were lower for the quarter due to a
higher provision for credit losses and narrower financing spreads,
partially offset by foreign exchange gains and lower selling,
administrative and general expenses. Net income was lower for the
nine months primarily due to narrower financing spreads, a higher
provision for credit losses and lower commissions from crop
insurance, partially offset by lower selling, administrative and
general expenses. Net receivables and leases financed by JDCC were
$19.336 billion at July 31, 2009, compared with $19.289 billion
last year. Net receivables and leases administered, which include
receivables administered but not owned, totaled $19.482 billion at
July 31, 2009, compared with $19.454 billion a year ago. Safe
Harbor Statement Safe Harbor Statement under the Private Securities
Litigation Reform Act of 1995: Statements under "Company Outlook
and Summary," "Market Conditions & Outlook," and other
statements herein that relate to future operating periods are
subject to important risks and uncertainties that could cause
actual results to differ materially. Some of these risks and
uncertainties could affect particular lines of business, while
others could affect all of the Company's businesses.
Forward-looking statements involve certain factors that are subject
to change, including for the Company's agricultural equipment the
many interrelated factors that affect farmers' confidence. These
factors include worldwide economic conditions, demand for
agricultural products, world grain stocks, weather conditions, soil
conditions, harvest yields, prices for commodities and livestock,
crop and livestock production expenses, availability of transport
for crops, the growth of non-food uses for some crops (including
ethanol and biodiesel production), real estate values, available
acreage for farming, the land ownership policies of various
governments, changes in government farm programs and policies
(including those in the U.S. and Brazil), international reaction to
such programs, global trade agreements, animal diseases and their
effects on poultry and beef consumption and prices (including avian
flu and bovine spongiform encephalopathy, commonly known as "mad
cow" disease), crop pests and diseases (including Asian rust), and
the level of farm product exports (including concerns about
genetically modified organisms). Factors affecting the outlook for
the Company's turf and utility equipment include general economic
conditions, consumer confidence, weather conditions, customer
profitability, consumer borrowing patterns, consumer purchasing
preferences, housing starts, infrastructure investment, spending by
municipalities and golf courses, and consumable input costs.
General economic conditions, consumer spending patterns, real
estate and housing prices, the number of housing starts and
interest rates are especially important to sales of the Company's
construction and forestry equipment. The levels of public and
non-residential construction also impact the results of the
Company's construction and forestry segment. Prices for pulp,
lumber and structural panels are important to sales of forestry
equipment. All of the Company's businesses and its reported results
are affected by general economic conditions in, and the political
and social stability of, the global markets in which the Company
operates, especially material changes in economic activity in these
markets; customer confidence in the general economic conditions;
foreign currency exchange rates, especially fluctuations in the
value of the U.S. dollar, interest rates and inflation and
deflation rates; capital market disruptions; significant changes in
capital market liquidity, access to capital and associated funding
costs; delays or disruptions in the Company's supply chain due to
weather, natural disasters or financial hardship or the loss of
liquidity by suppliers (including common suppliers with the
automotive industry); changes in and the impact of governmental
banking, monetary and fiscal policies and governmental programs in
particular jurisdictions or for the benefit of certain sectors;
actions by rating agencies; customer access to capital for
purchases of the Company's products and borrowing and repayment
practices, the number and size of customer loan delinquencies and
defaults, and the housing market credit crises; changes in the
market values of investment assets; production, design and
technological difficulties, including capacity and supply
constraints and prices; the availability and prices of
strategically sourced materials, components and whole goods;
start-up of new plants and new products; the success of new product
initiatives and customer acceptance of new products; oil and energy
prices and supplies; the availability and cost of freight; trade,
monetary and fiscal policies of various countries (including
protectionist policies that disrupt international commerce); wars
and other international conflicts and the threat thereof; actions
by the U.S. Federal Reserve Board and other central banks; actions
by the U.S. Securities and Exchange Commission; actions by
environmental, health and safety regulatory agencies, including
those related to engine emissions (in particular Tier 4 emission
requirements), noise and the risk of climate change; actions by
other regulatory bodies; actions of competitors in the various
industries in which the Company competes, particularly price
discounting; dealer practices especially as to levels of new and
used field inventories; labor relations and regulations; changes to
accounting standards; changes in tax rates and regulations; the
effects of, or response to, terrorism; and changes in laws and
regulations affecting the sectors in which the Company operates.
The spread of major epidemics (including H1N1 and other influenzas,
SARS, fevers and other viruses) also could affect Company results.
Changes in weather patterns could impact customer operations and
Company results. Company results are also affected by changes in
the level of employee retirement benefits, changes in market values
of investment assets and the level of interest rates, which impact
retirement benefit costs, and significant changes in health care
costs. Other factors that could affect results are acquisitions and
divestitures of businesses, the integration of new businesses, the
implementation of organizational changes such as combining of the
agricultural and commercial and consumer equipment segments,
changes in Company declared dividends and common stock issuances
and repurchases. With respect to the recent global economic
downturn, changes in governmental banking, monetary and fiscal
policies to restore liquidity and increase the availability of
credit may not be effective and could have a material impact on the
Company's customers and markets. Significant changes in market
liquidity conditions could impact access to funding and associated
funding costs, which could reduce the Company's earnings and cash
flows. The Company's investment management operations could be
impaired by changes in the equity and bond markets, which would
negatively affect earnings. General economic conditions can affect
the demand for the Company's equipment as well. Current negative
economic conditions and outlook have dampened demand for certain
equipment. Furthermore, governmental programs providing assistance
to certain industries or sectors could negatively impact the
Company's competitive position. The recent economic downturn and
market volatility have adversely affected the financial industry in
which John Deere Capital Corporation and other credit subsidiaries
(Credit) operate. Credit's liquidity and ongoing profitability
depend largely on timely access to capital to meet future cash flow
requirements and fund operations and the costs associated with
engaging in diversified funding activities and to fund purchases of
the Company's products. If market disruption and volatility
continue or worsen or access to governmental liquidity programs
decreases, funding could be unavailable or insufficient.
Additionally, under current market conditions customer confidence
levels may result in declines in credit applications and increases
in delinquencies and default rates, which could materially impact
Credit's write-offs and provisions for credit losses. The Company's
outlook is based upon assumptions relating to the factors described
above, which are sometimes based upon estimates and data prepared
by government agencies. Such estimates and data are often revised.
The Company, except as required by law, undertakes no obligation to
update or revise its outlook, whether as a result of new
developments or otherwise. Further information concerning the
Company and its businesses, including factors that potentially
could materially affect the Company's financial results, is
included in the Company's most recent annual report on Form 10-K
(including the factors discussed in Item 1A. Risk Factors) and
other filings with the U.S. Securities and Exchange Commission.
Third Quarter 2009 Press Release (millions of dollars) Unaudited
Three Months Ended July 31 Nine Months Ended July 31 % % 2009 2008
Change 2009 2008 Change Net sales and revenues: Agriculture and
turf net sales *** $4,651 $5,876 -21 $14,057 $15,500 -9
Construction and forestry net sales 632 1,194 -47 1,973 3,570 -45
Total net sales * 5,283 7,070 -25 16,030 19,070 -16 Credit revenues
501 550 -9 1,432 1,632 -12 Other revenues 101 119 -15 316 334 -5
Total net sales and revenues * $5,885 $7,739 -24 $17,778 $21,036
-15 Operating profit (loss): ** Agriculture and turf *** $480 $725
-34 $1,472 $2,001 -26 Construction and forestry (28) 93 (85) 376
Credit 95 111 -14 206 376 -45 Other 5 5 9 12 -25 Total operating
profit * 552 934 -41 1,602 2,765 -42 Interest, corporate expenses
and income taxes (132) (359) -63 (506) (1,057) -52 Net income $420
$575 -27 $1,096 $1,708 -36 * Includes equipment operations outside
the U.S. and Canada as follows: Net sales $1,940 $3,072 -37 $5,912
$7,942 -26 Operating profit $79 $332 -76 $245 $925 -74 The Company
views its operations as consisting of two geographic areas, the
"U.S. and Canada", and "outside the U.S. and Canada". ** Operating
profit (loss) is income from continuing operations before external
interest expense, certain foreign exchange gains and losses, income
taxes and corporate expenses. However, operating profit of the
credit segment includes the effect of interest expense and foreign
exchange gains or losses. *** At the beginning of the third quarter
of 2009, the Company combined the agricultural equipment and the
commercial and consumer equipment organizations. As a result, these
two segments have been combined into the agriculture and turf
segment. The net sales and operating profit for the agriculture and
turf segment for the third quarter and first nine months of 2009
and 2008 were as shown above. The information for the first two
quarters of 2009 and 2008 and fiscal years 2008 and 2007 in
millions of dollars were as follows: Agriculture and First Quarter
Second Quarter Years Turf 2009 2008 2009 2008 2008 2007 Net sales
$3,819 $3,501 $5,587 $6,124 $20,985 $16,454 Operating profit 289
340 703 936 2,461 1,747 DATASOURCE: Deere & Company CONTACT:
Ken Golden, Director, Strategic Public Relations of Deere &
Company, +1-309-765-5678 Web Site: http://www.deere.com/
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