SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report: August 12, 1997
(Date of earliest event reported)
D E E R E & C O M P A N Y
(Exact name of registrant as specified in charter)
DELAWARE
(State or other jurisdiction of incorporation)
1-4121
(Commission File Number)
36-2382580
(IRS Employer Identification No.)
John Deere Road
Moline, Illinois 61265
(Address of principal executive offices and zip code)
(309)765-8000
(Registrant's telephone number, including area code)
_______________________________________
(Former name or former address, if changed since last report.)
Page 1 of 9 pages.
The Exhibit Index appears at Page 4.
Item 7. Financial Statements, Pro Forma Financial Information
and Exhibits.
(c) Exhibits
(99) Press release and additional information.
Page 2
Signature
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned hereto duly authorized.
DEERE & COMPANY
By /s/ Frank S. Cottrell
---------------------------------
Frank S. Cottrell, Secretary
Dated: August 12, 1997
Page 3
Exhibit Index
Sequential
Number and Description of Exhibit Page Number
- --------------------------------- -----------
(99) Press release and additional information Pg. 5
Page 4
EXHIBIT 99
Contact: Marie Z. Ziegler
Director, Investor Relations
Deere & Company
(309)765-5014
DEERE & COMPANY THIRD QUARTER 1997 EARNINGS
- -------------------------------------------
For Immediate Release (August 12, 1997)
MOLINE, ILLINOIS - Deere & Company today reported record
third quarter worldwide net income of $252.7 million or $1.00 per
share for the quarter ended July 31, an increase of 27 percent in
earnings per share compared with $204.4 million or $.79 per share
in the third quarter of 1996. Net income for the first nine
months was $748.8 million or $2.94 per share compared with $643.4
million or $2.46 per share last year. Deere & Company Chairman
and Chief Executive Officer Hans W. Becherer said, "The higher
profits resulted from strong worldwide retail demand for the
company's products, especially tractors and combines. Operating
margins also continued at historically strong levels, reflecting
the results of the company's continuous improvement and quality
initiatives. Net income for the first nine months increased 16
percent compared with last year, while net income per share
increased 20 percent due to the company's previously announced
share repurchase program."
Worldwide net sales and revenues increased 18 percent to
$3.430 billion for the third quarter and 12 percent to $9.347
billion for the first nine months of 1997 compared with $2.905
billion and $8.311 billion, respectively, last year. Of these
amounts, sales of agricultural, construction and commercial and
consumer equipment were up 19 percent for the quarter and 13
percent for the nine months. International demand continued to be
strong, with export sales from the United States totaling $585
million for the quarter and $1,524 million year-to-date compared
to $495 million and $1,219 million for the same periods last
year. Additionally, overseas sales also increased, rising by
seven percent over last year's strong third quarter levels and 12
percent for the first nine months compared with a year ago.
Overall, the company's physical volume of sales (excluding the
sales by the newly consolidated Mexican subsidiaries) increased
12 percent for the first nine months of 1997 compared to last
year reflecting strong worldwide demand for our products,
including shipments to the former Soviet Union.
The company's worldwide equipment operations, which exclude
the financial services subsidiaries and unconsolidated
affiliates, had net income of $221.1 million for the third
quarter and $635.1 million for the first nine months of 1997
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compared with $153.1 million and $486.6 million for the same
periods last year. Worldwide equipment operating profit increased
to $384 million or 13 percent of net sales for the quarter and to
$1,095 million or 14 percent of net sales for the first nine
months of 1997 compared with $284 million or 11 percent of net
sales for the quarter and $889 million or 12 percent of net sales
for the first nine months of last year. Worldwide agricultural
equipment operating profit increased 29 percent to $279 million
for the quarter and 31 percent to $813 million for the first nine
months compared with $216 million and $619 million, respectively,
last year, reflecting higher production and sales volumes and
improved operating efficiencies. Worldwide construction equipment
operating profit totaled $60 million in the quarter and $175
million year-to-date compared with $53 million and $153 million,
respectively, last year, reflecting higher sales and improved
operating efficiencies, partially offset by start-up expenses
primarily at the new Torreon engine facility. Worldwide
commercial and consumer equipment operating profit totaled $45
million for the quarter and $107 million year-to-date compared
with last year's $15 million and $117 million, respectively. The
improvement in quarterly earnings was due primarily to higher
shipments resulting from strong demand coupled with the impact
from the division's continuing asset control program which
focuses on providing products closer to the required customer
delivery dates. Year-to-date results were lower compared with
last year reflecting higher growth expenditures and costs
associated with the discontinuation of the electric start string
trimmer line recorded during the second quarter of 1997, which
were partially offset by higher sales volume. Overseas equipment
operating profit totaled $109 million for the quarter and $290
million year-to-date, compared to $104 million and $265 million,
respectively, a year ago, reflecting continued strong sales
demand.
The company's asset management initiatives continued to show
excellent results. Equipment operations' assets at July 31, 1997
represented 70 percent of the last 12 months net sales compared
with 76 percent a year ago. Trade receivables and company
inventories totaled $4.684 billion at July 31 compared with
$4.445 billion at the end of the same period last year.
During the quarter, the company acquired Kemper, GmbH, a
leading European producer of specialized corn heads.
Additionally, the company recently formed a joint venture with
the Jiamusi Combine Harvester Factory located in Heilongjiang
Province in China, which manufactures and markets combines for
the Chinese market. These investments are a part of the company's
continuing growth initiatives and should enhance Deere's presence
in these important markets.
Net income of the financial services subsidiaries was $26.8
million for the third quarter and $110.2 million year-to-date
compared with $48.1 million and $149.2 million, respectively,
last year. Net income of the credit operations was $41.6 million
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for the quarter and $106.1 million for the first nine months this
year compared with $35.3 million and $109.7 million,
respectively, last year. Third quarter earnings reflect higher
income from a larger average receivable and lease portfolio and
gains from the sale of retail notes. Year-to-date results
decreased primarily due to narrower financing spreads and higher
expenditures associated with several growth initiatives, which
were partially offset by higher income from the larger average
portfolio. Net income of the insurance operations was $6.6
million for the quarter and $23.7 million year-to-date this year
compared with $8.0 million and $26.3 million, respectively, last
year. The decreases reflect lower investment income in both
periods of this year, lower underwriting results in the third
quarter of this year due to both assigned risk business
assessments and less favorable loss experience, coupled with a
small gain from the sale of the personal lines business in the
first nine months of last year. The health care operations
incurred a net loss of $21.4 million for the quarter and $19.6
million year-to-date this year compared with net income of $4.8
million and $13.2 million, respectively, last year. The losses
reflect continuing higher claims costs, reduced margins on the
health care insured business portfolio caused by highly
competitive industry market conditions, a strengthening of health
care claims reserves and higher selling, administrative and
general expenses. Additionally, charges associated with the
recently planned closure of two health care centers were recorded
in the quarter. Despite these losses on external business, John
Deere Health Care's efforts in controlling Deere's internal
health care costs, the primary mission of these operations,
remain on target with previous expectations and are expected to
continue to provide Deere & Company with high quality health care
at competitive costs.
Outlook
"The company's excellent financial results and the continued
strong levels of demand for our products provide a solid base for
future operations," Becherer said. "Retail demand for 1997 is
benefiting from a growing global economy, healthy agricultural
markets and generally high levels of farmer confidence. Improving
dietary trends and rapid income growth in many developing nations
continue to stimulate strong demand for farm commodities. Despite
lower commodity prices compared to a year ago, this year's good
anticipated harvests should bolster farm cash income.
Additionally, substantial payments to farmers provided by the U.S.
farm bill, which are unrelated to commodity prices, continue
to promote solid agricultural cash flow to farmers. Based on
these factors, as well as strong overseas demand and the
excellent customer response to the many new and innovative
products being introduced by the company, we expect worldwide
agricultural demand to remain at high levels throughout 1997.
"Industry retail demand for construction equipment is strong
and is expected to remain at current levels throughout the
remainder of the year as favorable economic growth, rising
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incomes and low inflation rates continue to result in good
housing demand," Becherer said. "Additionally, Deere's retail
demand is benefiting from sales of the recently introduced new
construction equipment models. Commercial and consumer equipment
industry retail sales volumes increased compared with last year's
levels, which were unfavorably impacted by adverse weather during
the spring selling season. Retail volumes for both the industry
and Deere are expected to be at strong levels throughout the
remainder of the year. The credit and insurance operations are
expected to remain at good levels reflecting both the healthy
demand for the company's products and continued economic growth.
Health care margins will continue under pressure due to the
extremely competitive operating conditions in that market place.
"Based on this outlook, the 1997 planned comparable physical
volume of sales has been increased and is now expected to be
approximately 11 percent higher than last year," Becherer said.
"Fourth quarter comparable physical volume of sales also has been
increased, and is expected to be approximately eight percent
higher than a year ago. Additionally, negotiations are currently
underway on a new labor agreement which will replace the current
agreement that expires October 1, 1997 covering all U.A.W.
employees. It is premature to determine the results of these
discussions.
"Overall, the outlook for the company's businesses remains
very positive," Becherer said. "Our overall net sales and
revenues continue to benefit from favorable market conditions and
our new product introductions. Although we are investing in
numerous strategic growth opportunities, our operating margins
are benefiting from our continuous improvement initiatives.
Additionally, the company's excellent worldwide dealer
organization, which provides a strong and important link to our
customers, continues to effectively market and support our lines
of quality products while assisting the company in attaining
exceptionally high levels of customer satisfaction. In summary,
industry demand for our products remains strong, and the recent
introductions of a wide array of exciting new products should
promote market share growth in existing and new markets
throughout the world. Based on these factors, we expect continued
excellent operating performance."
John Deere Capital Corporation
The following is disclosed on behalf of the company's credit
subsidiary, John Deere Capital Corporation, in connection with
the disclosure requirements of programs providing for the
issuance of debt securities:
John Deere Capital Corporation's net income was $37.8 million
in the third quarter and $96.5 million for the first nine months
of 1997 compared with $32.3 million and $102.5 million for the
same periods last year. Third quarter earnings reflect higher
income from a larger average balance of receivables and leases
financed and gains from the sale of retail notes. Year-to-date
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results decreased primarily due to narrower financing spreads and
higher expenditures associated with several growth initiatives,
which were partially offset by higher income from a 19 percent
increase in the average balance of receivables and leases
financed during the first nine months.
Financing receivable and lease acquisition volumes increased
nine percent for the quarter and 18 percent for the first nine
months of 1997 compared to a year ago primarily due to the
increased sales of John Deere equipment. Acquisitions of retail
notes, revolving charge accounts, leases and wholesale
receivables all increased compared with last year.
Net receivables and leases financed by John Deere Capital
Corporation were $6.214 billion at July 31, 1997 compared with
$5.297 billion one year ago. The increase resulted from financing
receivable and lease acquisitions exceeding collections during
the last 12 months, partially offset by retail note sales during
the same period. Net credit receivables and leases administered,
which include receivables previously securitized and sold,
totaled $7.254 billion at July 31, 1997 compared with $6.411
billion at July 31, 1996.
Safe Harbor Statement
Safe Harbor Statement under the Private Securities Litigation
Reform Act of 1995:
Statements under the "Outlook" heading, which relate to
future operating periods, are subject to important risks and
uncertainties that could cause actual results to differ
materially. The company's businesses include equipment operations
(agricultural, construction and commercial and consumer) and
financial services (credit, insurance and health care). Forward-
looking statements relating to these businesses involve certain
factors that are subject to change, including: the many
interrelated factors that affect farmers' confidence, including
worldwide demand for agricultural products, world grain stocks,
commodities prices, weather, animal diseases, crop pests, harvest
yields, real estate values and government farm programs; general
economic conditions and housing starts; legislation, primarily
legislation relating to agriculture, the environment, commerce
and government spending on infrastructure; actions of competitors
in the various industries in which the company competes;
production difficulties, including capacity and supply
constraints; dealer practices; labor relations; interest and
currency exchange rates; accounting standards; and other risks
and uncertainties. The company's outlook is based upon
assumptions relating to the factors described in the preceding
sentence. 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 as filed with
the Securities and Exchange Commission.
# # #
The attached data accompany this press release.
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Third Quarter 1997 Press Release
--------------------------------
Net sales and revenues:
(millions of dollars)
Three Months Ended Nine Months Ended
July 31 July 31
------------------- -------------------
% %
1997 1996 Chng 1997 1996 Chng
------ ------ ---- ------ ------ ----
Net sales:
Agricultural
equipment $1,907 $1,612 + 18 $5,128 $4,437 +16
Construction
equipment 579 496 + 17 1,631 1,454 +12
Commercial and
consumer equipment 507 408 + 24 1,344 1,261 + 7
Total net sales 2,993 2,516 + 19 8,103 7,152 +13
Financial Services
revenues 400 352 + 14 1,135 1,059 + 7
Other revenues 37 37 109 100 + 9
Total net sales
and revenues $3,430 $2,905 + 18 $9,347 $8,311 +12
United States and
Canada:
Equipment net sales $2,113 $1,691 + 25 $5,748 $5,050 +14
Financial Services
revenues 400 352 + 14 1,135 1,059 + 7
Total 2,513 2,043 + 23 6,883 6,109 +13
Overseas net sales 880 825 + 7 2,355 2,102 +12
Other revenues 37 37 109 100 + 9
Total net sales
and revenues $3,430 $2,905 + 18 $9,347 $8,311 +12
Operating profit*:
Agricultural
equipment $ 279 $ 216 + 29 $ 813 $ 619 +31
Construction
equipment 60 53 + 13 175 153 +14
Commercial and
consumer equipment 45 15 +200 107 117 - 9
Equipment Operations 384 284 + 35 1,095 889 +23
Financial Services 41 75 - 45 171 229 -25
Total operating
profit 425 359 + 18 1,266 1,118 +13
Interest and corporate
expenses - net (21) (39) - 46 (71) (110) -35
Income taxes (151) (116) + 30 (446) (365) +22
Net income $ 253 $ 204 + 24 $ 749 $ 643 +16
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Third Quarter 1997 Press Release
--------------------------------
Selected balance sheet data:
(millions of dollars)
July 31 October 31 July 31
1997 1996 1996
------- ---------- -------
Equipment Operations:
Trade accounts and notes
receivable - net 3,513 3,153 3,504
Inventories 1,171 829 941
Financial Services:
Financing receivables and
leases financed - net 6,811 6,086 5,926
Financing receivables and
leases administered - net 8,100 7,487 7,119
Insurance companies' assets 1,015 1,068 1,068
Health care companies'
assets 240 236 226
Average shares
outstanding 254,530,315 260,547,221 261,340,899
* Operating profit is defined as income before interest expense,
foreign exchange gains and losses, income taxes and certain
corporate expenses, except for the operating profit of Financial
Services which includes the effect of interest expense.
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