SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report: August 18, 1998
(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.)
One John Deere Place
Moline, Illinois 61265
(Address of principal executive offices and zip code)
(309)765-8000
(Registrant's telephone number, including area code)
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(Former name or former address, if changed since last report.)
Page 1 of 12 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 18, 1998
Page 3
Exhibit Index
Sequential
Number and Description of Exhibit Page Number
- --------------------------------- -----------
(99) Press release and additional information Pg. 5
Page 4
EXHIBIT 99
Greg Derrick
(Deere Logo) Deere & Company
(309)765-5290
DEERE THIRD-QUARTER EARNINGS RISE 15%; EPS UP 20%
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For Immediate Release (18 August 1998)
MOLINE, IL -- Deere & Company today reported record third-
quarter net income of $290.8 million, or $1.20 per share, for
the three months ended July 31, compared with $252.7 million,
or $1.00 per share, last year. This represented an increase of
15 percent in net income and 20 percent in earnings per share.
Nine-month net income was $859.3 million, or $3.49 per share,
an increase of 15 percent in net income and 19 percent in
earnings per share, compared with last year's $748.8 million,
or $2.94 per share. Earnings per share continued to benefit
from the company's share-repurchase program.
Revenue growth, driven by a continuation of favorable
demand for company products, as well as cost reductions and
progress in quality initiatives, led to the record
performance. Stated Hans W. Becherer, chairman and chief
executive officer, "Third-quarter profits reflected positive
contributions from all business segments and remained at
record levels despite continued expenditures for new products,
growth opportunities, and increasingly challenging
agricultural market conditions."
Worldwide net sales and revenues rose 8 percent for the
quarter, to $3.693 billion, and 14 percent for nine months, to
$10.609 billion, compared with $3.430 billion and $9.347
billion, respectively, last year. Net equipment sales
increased 8 percent for the quarter, to $3.218 billion, and 14
percent for nine months, to $9.233 billion. This compared with
sales of $2.993 billion and $8.103 billion for the periods a
year ago.
Export sales from the United States remained at favorable
levels, totaling $551 million for the third quarter and $1.565
billion year-to-date, versus $585 million and $1.524 billion
for the same periods last year. Despite an adverse foreign-
exchange translation impact, overseas sales were slightly
higher in dollar terms for both the quarter and year-to-date.
Overall, the company's physical volume of sales increased 15
percent for the first nine months, compared with last year.
Worldwide equipment operations, which exclude the
financial services subsidiaries and unconsolidated affiliates,
had record net income of $235.5 million for the third quarter
and $723.6 million for the first nine months, compared with
$221.1 million and $635.1 million last year. Operating margins
remained at favorable levels despite competitive pricing
actions and spending on growth opportunities. In addition,
this year's results were affected by adverse currency
fluctuations and higher interest expense. Worldwide equipment
operating profit increased to $431 million for the quarter,
and to $1,270 million for the first nine months, compared with
$384 million and $1,095 million last year. Operating profit as
a percent of net sales was unchanged compared with last year,
at 13 percent for the quarter and 14 percent for the first
nine months.
Page 5
. Operating profit for worldwide agricultural equipment
increased 1 percent for the quarter, to $282 million, and
5 percent for the first nine months, to $852 million.
This was in comparison with $279 million and $813 million
last year. For both periods, higher sales and lower
operating expenses were partially offset by higher sales
incentive costs, higher expenditures for growth
initiatives and a less favorable sales mix.
. Worldwide construction equipment operating profit
increased 72 percent for the quarter, to $103 million,
and 47 percent for the first nine months, to $258
million, versus $60 million and $175 million for the
periods last year. Revenue growth and higher production
volumes associated with strong market acceptance of new
products, as well as better efficiencies, led to the
improvement. Partially offsetting these factors were
higher sales incentive costs, mainly in the first half of
this year, and start-up expenses at the Torreon, Mexico,
engine facility.
. Despite continued investment in new products and
manufacturing facilities, worldwide commercial and
consumer equipment operating profit rose 2 percent for
the quarter, to $46 million, and increased 50 percent for
nine months, to $160 million. Last year's operating
profit was $45 million and $107 million for the
respective periods. The improvements were due to higher
sales and production volumes, driven by strong retail
demand, as well as by improved operating efficiencies.
Results in 1998 included higher expenses for the
development and introduction of new products and the
start-up of new manufacturing facilities. Last year's
results were adversely affected by a second quarter
write-off related to a Homelite product.
As expected, trade receivables and company inventories
declined during the quarter while remaining above year-ago
levels. The increase from last year was primarily due to
higher sales and production volumes and the resulting
increases in receivables related to agricultural-equipment
used goods. Equipment operations' assets at July 31 were 74.7
percent of the last 12 months' net sales, compared with 70.4
percent a year ago. The higher ratio primarily reflected an
increase in prepaid pension cost assets.
Net income of the financial services subsidiaries was
$46.9 million for the quarter and $124.1 million for nine
months, compared with $26.8 million and $110.2 million for the
same periods last year.
. Net income of the credit operations increased to $43.1
million for the third quarter, and to $111.2 million for
the year-to-date, compared with $41.6 million and $106.1
million last year. Third-quarter and year-to-date results
benefited from higher income on a larger average
receivable and lease portfolio, partially offset by
higher operating costs and narrower financing spreads. In
addition, year-to-date earnings benefited from higher
gains on the sale of retail notes.
Page 6
. Insurance operations' net income was $2.0 million for the
third quarter and $11.8 million for the first nine
months, compared with last year's $6.6 million and $23.7
million. The quarterly decrease primarily reflected
unfavorable underwriting results caused by abnormally
high weather-related property claims. Nine-month
underwriting results were also affected by adverse loss
development in the transportation business. In addition,
premium volumes were lower than last year due to
competitive market conditions.
. Health care operations had net income of $1.8 million for
the quarter and $1.1 million for the first nine months,
compared with net losses of $21.4 million and $19.6
million last year. The 1998 results benefited from higher
premium revenues, improved margins and lower
administrative expenses. Last year, results were
adversely affected by high claims costs, unfavorable
margins, a strengthening of claims reserves and charges
for the planned closures of two health care centers.
OUTLOOK
With regard to the company's agricultural-equipment
operations, worldwide farm-commodity prices continued on a
downward course during the quarter as a result of prospects
for increased global supplies of grains and oilseeds, as well
as fears about the Asian economic crisis. U.S. crop conditions
remained generally good throughout the Midwest, with federal
financial assistance expected to offset some of the drought-
related losses being experienced in the South. Under these
conditions, it is expected that retail demand for agricultural
equipment will decline for the rest of 1998 and 1999. In light
of this outlook and the company's continuing commitment to
aggressive asset management, production schedules have been
reduced in the fourth quarter of 1998 and are expected to be
reduced in 1999.
In the construction-equipment sector, low interest rates
and generally favorable economic conditions have continued to
strengthen demand. Housing starts are expected to average
above 1.5 million units in 1998, their highest level in more
than a decade. In addition, a new highway bill, the
Transportation Equity Act for the 21st Century, will provide a
significant increase in highway funding over the next six
years. Although the retail environment is expected to remain
healthy, fourth-quarter production volumes of Deere
construction equipment will decline with the introduction of a
new product-distribution system. It is designed to more
closely align production with retail demand and thus reduce
inventory levels. Next quarter's construction-equipment
production schedules have been set lower as a result.
Sales of John Deere commercial and consumer equipment
should continue benefiting from low unemployment, low interest
rates, rising incomes and the strong housing market. In
addition, the division's growing line of new products is
expected to continue meeting strong success in the
marketplace.
In financial services, credit operations should continue
benefiting from higher portfolio balances. Insurance
operations results, however, are expected to be significantly
below last year's as a result of competitive market conditions
and continuing unfavorable loss experience. While health care
margins remain under pressure due to a very competitive
industry environment, improvement plans are on target and are
expected to result in significantly better financial results
for the remainder of 1998 versus last year.
Page 7
Based on these conditions, the company's worldwide
physical volume of sales is currently projected to increase by
approximately 10 percent in 1998, compared with 1997. Fourth-
quarter physical volumes are projected to be approximately 2
percent below comparable levels for fourth-quarter 1997.
Assessing the outlook, Becherer said the company is well-
positioned for continued good results despite a prospective
slowdown in the farm economy. "We're confident that our
continuing investment in new products and facilities, and
geographic expansions, will help us deliver solid returns
through all phases of the business cycle," he said. "At the
same time, initiatives geared to process and quality
improvement are moving ahead and are expected to yield
substantial efficiency gains in the future."
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 applicable to its
periodic issuance of debt securities in the public market:
John Deere Capital Corporation's net income was $39.9
million in the third quarter and $103.4 million for the first
nine months of 1998, compared with $37.8 million and $96.5
million for the same periods last year. The third quarter and
year-to-date results benefited from higher income on a larger
average receivable and lease portfolio, partially offset by
higher operating costs and narrower financing spreads. In
addition, the year-to-date results benefited from higher gains
on the sale of retail notes.
Net receivables and leases financed by John Deere Capital
Corporation were $6.952 billion at July 31,1998, compared with
$6.214 billion one year ago. The increase resulted from
acquisitions exceeding collections during the last 12 months,
partially offset by sales of retail notes. Receivable and
lease acquisition volumes during the first nine months
increased 18 percent compared with the same period last year.
Net receivables and leases administered, which include
receivables previously sold, totaled $8.381 billion at July
31, 1998, compared with $7.254 billion at July 31, 1997.
Page 8
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 conditions, 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. Dealers' retail sales of agricultural equipment
are especially affected by the weather in the summer, while
the number of housing starts is especially important to sales
of construction equipment. Economic difficulties in Asia could
continue to adversely affect North American grain and meat
exports. 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 may be subject to revision. 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
filings with the Securities and Exchange Commission.
# # #
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Third Quarter 1998 Press Release
Net sales and revenues:
(millions of dollars except per share amounts)
Three Months Ended
July 31
%
1998 1997 Change
Net sales: ------ ------ ------
Agricultural equipment $1,969 $1,907 + 3
Construction equipment 709 579 + 22
Commercial and consumer equipment 540 507 + 7
------ ------
Total net sales 3,218 2,993 + 8
Financial Services revenues 435 400 + 9
Other revenues 40 37 + 8
------ ------
Total net sales and revenues $3,693 $3,430 + 8
====== ======
United States and Canada:
Equipment net sales $2,319 $2,113 + 10
Financial Services revenues 435 400 + 9
------ ------
Total 2,754 2,513 + 10
Overseas net sales 899 880 + 2
Other revenues 40 37 + 8
------ ------
Total net sales and revenues $3,693 $3,430 + 8
====== ======
Operating profit:
Agricultural equipment $ 282 $ 279 + 1
Construction equipment 103 60 + 72
Commercial and consumer equipment 46 45 + 2
------ ------
Equipment Operations* 431 384 + 12
Financial Services 70 41 + 71
------ ------
Total operating profit 501 425 + 18
Interest and corporate expenses-net (55) (21) +162
Income taxes (155) (151) + 3
------ ------
Net income $ 291 $ 253 + 15
====== ======
Per Share:
Net income $ 1.20 $ 1.00 + 20
Net income - diluted $ 1.19 $ .99 + 20
* Includes overseas operating profit $ 106 $ 109 - 3
====== ======
Page 10
Third Quarter 1998 Press Release
Net sales and revenues:
(millions of dollars except per share amounts)
Nine Months Ended
July 31
%
1998 1997 Change
Net sales: ------ ------ ------
Agricultural equipment $5,638 $5,128 + 10
Construction equipment 2,001 1,631 + 23
Commercial and consumer equipment 1,594 1,344 + 19
------ ------
Total net sales 9,233 8,103 + 14
Financial Services revenues 1,261 1,135 + 11
Other revenues 115 109 + 6
------ ------
Total net sales and revenues $10,609 $9,347 + 14
====== ======
United States and Canada:
Equipment net sales $6,867 $5,748 + 19
Financial Services revenues 1,261 1,135 + 11
------ ------
Total 8,128 6,883 + 18
Overseas net sales 2,366 2,355
Other revenues 115 109 + 6
------ ------
Total net sales and revenues $10,609 $9,347 + 14
====== ======
Operating profit:
Agricultural equipment $ 852 $ 813 + 5
Construction equipment 258 175 + 47
Commercial and consumer equipment 160 107 + 50
------ ------
Equipment Operations* 1,270 1,095 + 16
Financial Services 191 171 + 12
------ ------
Total operating profit 1,461 1,266 + 15
Interest and corporate expenses-net (124) (71) + 75
Income taxes (478) (446) + 7
------ ------
Net income $ 859 $ 749 + 15
====== ======
Per Share:
Net income $ 3.49 $ 2.94 + 19
Net income - diluted $ 3.45 $ 2.91 + 19
* Includes overseas operating profit $ 268 $ 290 - 8
====== ======
Page 11
Third Quarter 1998 Press Release
Selected balance sheet data: Jul 31 Oct 31 Jul 31
(millions of dollars and shares) 1998 1997 1997
------ ------ ------
Equipment Operations:
Trade accounts and notes
receivable-net $4,209 $3,334 $3,513
Inventories $1,337 $1,073 $1,171
Financial Services:
Financing receivables and leases
financed - net $7,786 $6,902 $6,811
Financing receivables and leases
administered - net $9,325 $8,416 $8,100
Insurance companies' assets $1,000 $ 994 $1,015
Health care companies' assets $ 238 $ 233 $ 240
Average shares outstanding 246.0 253.7 254.5
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