- Company remains solidly profitable despite global economic
pressures. MOLINE, Ill., Feb. 18 /PRNewswire-FirstCall/ -- Deere
& Company today announced worldwide net income of $203.9
million, or $0.48 per share, for the first quarter ended January
31, compared with $369.1 million, or $0.83 per share, for the same
period last year. Worldwide net sales and revenues decreased 1
percent, to $5.146 billion, for the first quarter compared with
$5.201 billion a year ago. Net sales of the equipment operations
were $4.560 billion for the period compared with $4.531 billion
last year. (Logo:
http://www.newscom.com/cgi-bin/prnh/20030326/JOHNDEERELOGO) "During
a period of considerable economic uncertainty, John Deere has
completed another profitable quarter and sees further opportunities
to advance its global competitive position," said Robert W. Lane,
chairman and chief executive officer. "At the same time, ongoing
higher material costs, the deepening global recession, and volatile
foreign exchange rates have put downward pressure on our financial
results." Demand for large productive agricultural machinery has
held up well, Lane noted, due in substantial part to the sound
financial health of the U.S. farm sector. Also of benefit has been
the company's access to global capital markets, which is helping
ensure that ample financing remains available for many customers.
During the quarter, Deere's credit operations obtained funding that
exceeded all maturing medium- term notes and asset-backed
securities for the entire fiscal year. Summary of Operations Net
sales of the worldwide equipment operations increased 1 percent for
the quarter. Included were price changes of 6 percent offset by an
unfavorable currency-translation effect of 6 percent. Equipment net
sales in the United States and Canada increased 1 percent for the
quarter. Net sales outside the United States and Canada were
unchanged for the quarter, including an unfavorable
currency-translation effect of 14 percent. Deere's equipment
operations reported operating profit of $307 million for the
quarter compared with $457 million last year. The deterioration was
due largely to increased raw material costs and unfavorable effects
of volatile foreign-currency exchange, partially offset by improved
price realization. The company's focus on rigorous asset management
continued to produce improved results. Trade receivables and
inventories at the end of the quarter were $7.312 billion, or 28
percent of previous 12-month sales, compared with $6.488 billion,
or 29 percent of sales, a year ago. Financial services reported net
income of $46.8 million for the quarter compared with $97.7 million
last year. Results were lower primarily due to narrower financing
spreads, lower commissions from crop insurance and a higher
provision for credit losses. Company Outlook & Summary The
outlook for the coming year remains unusually uncertain, especially
with respect to foreign exchange, and the outlook's impact on the
company's sales and earnings difficult to assess. Company equipment
sales are projected to be down about 8 percent for the full year
and down about 9 percent for the second quarter. Included is a
negative currency-translation impact of about 6 percent for both
the year and second quarter. Deere's net income is expected to be
about $1.5 billion for 2009, with more risk on the downside at this
time. The company is suspending its practice of providing a
quarterly net income forecast in light of highly uncertain
conditions in the global economy, including volatility in foreign
exchange rates. "Deere's investment in advanced technology and its
emphasis on disciplined asset management should help the company
meet present economic challenges while extending its strong global
position," Lane said. "Though restrained by the current recession,
positive trends that support our businesses, such as global demand
for food and infrastructure, remain intact in our view and continue
to hold great promise." Equipment Division Performance
Agricultural. Agricultural equipment sales were up 18 percent for
the quarter, largely due to higher shipment volumes and improved
price realization, partially offset by the unfavorable effects of
currency translation. Operating profit was $348 million for the
quarter, compared with $332 million last year. Contributing to
operating profit was improved price realization and the favorable
impact of higher shipment and production volumes, partially offset
by higher raw material costs. Also having a negative impact on
operating profit was sharp volatility in foreign-currency exchange.
Commercial & Consumer. Sales for the commercial and consumer
equipment division declined 25 percent for the first quarter. The
division had an operating loss of $59 million for the period,
compared with last year's operating profit of $8 million. The
decline was due primarily to the unfavorable impact of lower
shipment and production volumes and higher raw material costs,
partially offset by lower selling, administrative and general
expenses and improved price realization. Construction &
Forestry. Sales were down 28 percent for the quarter, with
operating profit of $18 million versus $117 million a year ago. The
profit decrease was due primarily to the unfavorable impact of
lower shipment and production volumes and higher raw material
costs, partially offset by improved price realization and lower
selling, administrative and general expenses. Market Conditions
& Outlook As previously cited, the outlook for the coming year
remains unusually uncertain, particularly with respect to foreign
exchange. The outlook's impact on the company's three equipment
businesses and on the net income of the credit operation is
difficult to assess. Agricultural. Worldwide sales of the company's
agricultural equipment are forecast to decrease by about 2 percent
for full-year 2009. This includes a negative currency-translation
impact of about 7 percent. Farm-machinery industry sales in the
United States and Canada are forecast to be flat to up 5 percent
for the year, led by an increase in large tractors and combines.
The company expects agricultural commodity prices to remain healthy
in 2009 and for fuel and fertilizer costs to moderate. Sales of
certain types of equipment are expected to be down significantly
for the year. These include small tractors, cotton equipment, and
machinery used by livestock producers. In other parts of the world,
industry sales are expected to be generally lower as a result of
deteriorating economic conditions, credit cost and availability,
and changes in currency values. In addition, sales in parts of
Australia and South America are expected to be hurt by drought. On
this basis, industry sales in Western Europe are forecast to be
down 10 to 15 percent for the year, while sales are expected to
decline significantly in Central Europe and the CIS (Commonwealth
of Independent States) countries, including Russia. In South
America, industry sales are projected to be lower by 15 to 25
percent. Commercial & Consumer. Reflecting the U.S. housing
slump and recessionary economic conditions, commercial and consumer
equipment division sales are projected to be down about 14 percent
for the year. Construction & Forestry. Largely as a consequence
of a slumping global economy and historically low levels of
construction activity in the United States, Deere's worldwide sales
of construction and forestry equipment are forecast to decline by
approximately 24 percent for the year. The outlook includes a
substantially lower level of global forestry equipment sales as a
result of the economic slowdown. Credit. Full-year 2009 net income
for Deere's credit operations is forecast to be approximately $250
million. The forecast decrease from 2008 is primarily due to
narrower financing spreads related to the current funding
environment, a higher provision for credit losses and lower
commissions from crop insurance. 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 $35.0 million for the first quarter, compared with net income
of $77.2 million last year. Results were lower primarily due to
narrower financing spreads, lower commissions from crop insurance
and an increase in the provision for credit losses. Net receivables
and leases financed by JDCC were $18.459 billion at January 31,
2009, compared with $18.261 billion last year. Net receivables and
leases administered, which include receivables administered but not
owned, totaled $18.628 billion at January 31, 2009, compared with
$18.470 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 segment 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 bio-energy 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 commercial and
consumer equipment segment 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 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; 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 sub-prime credit
market 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; 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); 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 influenza, 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, changes in Company
declared dividends and common stock issuances and repurchases. With
respect to the current 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. Recent 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 current economic downturn and
market volatility have adversely affected the financial industry in
which John Deere Capital Corporation (Capital Corporation)
operates. Capital Corporation'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 current levels of 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
Capital Corporation'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. First Quarter 2009 Press Release (in millions of
dollars) Three Months Ended January 31 % 2009 2008 Change Net sales
and revenues: Agricultural equipment net sales $3,261 $2,758 +18
Commercial and consumer equipment net sales 558 743 -25
Construction and forestry net sales 741 1,030 -28 Total net sales *
4,560 4,531 +1 Credit revenues 474 550 -14 Other revenues 112 120
-7 Total net sales and revenues * $5,146 $5,201 -1 Operating profit
(loss): ** Agricultural equipment $348 $332 +5 Commercial and
consumer equipment (59) 8 Construction and forestry 18 117 -85
Credit 53 133 -60 Other 4 3 +33 Total operating profit * 364 593
-39 Interest, corporate expenses and income taxes (160) (224) -29
Net income $204 $369 -45 * Includes equipment operations outside
the U.S. and Canada as follows: Net sales $1,817 $1,808 Operating
profit $79 $210 -62 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 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. http://www.newscom.com/cgi-bin/prnh/20030326/JOHNDEERELOGO
http://photoarchive.ap.org/ 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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