_____________________________________________________________
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: November 24, 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)
_______________________________________
(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: November 24, 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
Gregory T. Derrick
(DEERE LOGO) Deere & Company
Moline, Illinois 61265
(309)765-5290
DEERE EARNINGS REACH $1 BILLION FOR YEAR; EPS UP 11%
FOURTH-QUARTER DOWN DUE TO WEAKENING FARM ECONOMY
For Immediate Release (24 November 1998)
MOLINE, IL -- Deere & Company today reported a record level
of net income for fiscal year 1998, but lower earnings for the
fourth quarter due to a slowing farm economy. Net income for the
quarter was $162.1 million, or $.71 per share ($.71 diluted),
compared with $211.3 million, or $.84 per share ($.83 diluted),
in the fourth quarter of last year. For full-year 1998, net
income increased 6 percent to $1.021 billion, or $4.20 per share
($4.16 diluted), from $960.1 million, or $3.78 per share ($3.74
diluted), last year. Net income per share rose 11 percent for
the year.
"Our record results for the year demonstrate the company's
commitment to achieving excellent operating performance," said
Hans W. Becherer, chairman and chief executive officer. Fourth-
quarter profits, however, were adversely affected by production
cutbacks, made in response to an increasingly challenging farm
environment. "We have moved aggressively to reduce production of
large tractors and combines in order to keep inventories in
check and respond to levels of demand that have suffered abrupt
and serious erosion."
Worldwide net sales and revenues fell 7 percent, to $3.212
billion for fourth-quarter 1998, compared with $3.444 billion
last year. For the entire year, net sales and revenues increased
8 percent, to $13.822 billion, compared with $12.791 billion
last year. Net sales to dealers of agricultural, construction,
and commercial and consumer equipment declined 10 percent for
the quarter, to $2.693 billion, compared with $2.979 billion a
year ago, primarily due to weaker economic conditions in
agricultural-equipment markets. Full-year net sales increased 8
percent, to $11.926 billion, compared with $11.082 billion last
year. Export sales from the United States totaled $405 million
for the quarter and $1.970 billion for the year, compared with
$489 million and $2.013 billion in 1997. Overseas sales,
affected by weaker economic conditions and adverse currency
fluctuations, declined 4 percent from last year's fourth quarter
and ended the year slightly lower. Overall, the company's
physical volume of sales decreased 9 percent for the quarter,
while moving 8 percent higher for the year.
Worldwide equipment operations, which exclude the financial
services subsidiaries and unconsolidated affiliates, had net
income of $107.6 million for the fourth quarter, compared with
$181.5 million last year. The decline was mainly due to lower
sales and production volumes of North American agricultural
equipment. For the year, equipment operations' net income was a
record $831.2 million, compared with $816.7 million in 1997.
Leading to the year's record results was the strong performance
of the company's commercial and consumer-equipment and
construction-equipment divisions. Overall, the annual
improvement was due to higher sales and production volumes,
partially offset by higher sales-incentive costs, growth
expenditures, interest expense and unfavorable currency
fluctuations. Operating profit before taxes, interest expense
and other corporate expenses represented 7.7 percent of net
sales for the fourth quarter and 12.4 percent for the year,
versus 10.3 percent and 12.6 percent, respectively, in 1997.
Page 5
. Worldwide agricultural equipment had fourth-quarter
operating profit of $110 million, compared with $260 million
last year. Lower sales and production volumes, higher sales-
incentive costs and inefficiencies associated with production
cuts were primary reasons for the quarter's decline. Lower farm-
commodity prices and economic instability in certain parts of
the world adversely affected retail demand for agricultural
equipment during the period. For the year, operating profit was
$962 million, compared with $1,072 million last year. The
decline was primarily due to higher sales-incentive costs, an
unfavorable sales mix and inefficiencies associated with the
production cuts, partially offset by higher sales.
. Worldwide construction equipment operating profit totaled
$43 million for the quarter, compared with $40 million last
year. Sales decreased in the fourth quarter from last year's
levels, which benefited from the shipment of several new
products. Operating income for the quarter rose due to lower
sales-incentive costs and lower operating expenses. For the
year, operating profit was $300 million, versus $216 million in
1997. The improvement resulted from higher sales and production
volumes, lower operating expenses and improved operating
efficiencies, partially offset by higher sales-incentive costs
and production start-up expenses at the engine facility in
Torreon, Mexico.
. Worldwide commercial and consumer equipment operating
profit was $54 million for the quarter and $214 million for the
year, compared with $6 million and $114 million, respectively,
last year. The improvements were due to higher sales and
production volumes driven by strong retail demand for the
company's products, as well as by improved operating
efficiencies. Results for the year included higher expenses for
the promotion of new products and the start-up of new
facilities. Last year's results were adversely affected by
write-offs related to the Homelite product line.
Equipment operations' assets at October 31, 1998, were 76.3
percent of the last 12 months' net sales, compared with 69.7
percent a year ago. The higher ratio primarily reflected higher
receivables and inventories. As expected, trade receivables and
company inventories declined during the fourth quarter while
remaining above year-ago levels. The reduced level of
agricultural-equipment production, initiated during the year, is
intended to bring receivables and inventories into better
balance with current levels of demand.
Net income of the financial services subsidiaries was $51.1
million for the quarter and $175.2 million for the year,
compared with $27.9 million and $138.1 million last year. The
improvement was due to record results of the credit subsidiaries
and a substantial turn around in the performance of health-care
operations. Partially offsetting these improvements were adverse
underwriting results in the company's insurance business.
Page 6
Market Conditions and Outlook
Grain and oilseed prices declined significantly during the
fourth quarter on prospects for record or near-record crop
production and the effects of weakening demand from Asia. Pork
prices moved substantially lower as well. As a result, U.S. farm
income is expected to continue to decline in 1999, despite a
recently enacted emergency government-aid package. At the same
time, farm-income declines are expected in other parts of the
world, and unsettled financial conditions should continue to
have an unfavorable impact on credit availability in emerging
markets. Accordingly, retail demand for agricultural equipment
in 1999 is now projected to decline by 20 percent in North
America, by 10 percent in Europe, and by 15 percent in Latin
America and Australia. Deere's first-quarter financial results
will be significantly affected by the production cuts of large
tractors and combines associated with this lower level of
demand.
North American construction-equipment industry sales, and
housing starts, are expected to decline slightly next year but
remain at favorable levels. In addition, the company is
implementing an initiative aimed at better matching production
schedules to customer orders, leading to lower field inventories
and improved product availability. Initial stages of
implementation will result in lower shipments to dealers.
Sales of commercial and consumer equipment should continue
to increase in 1999 following strong gains in 1998. New product
introductions are expected to expand Deere's position in the
many growing markets served by this division.
Credit operations are expected to improve in 1999 because of
a larger portfolio, primarily due to recent growth in leasing.
Insurance and health-care operations also are well-positioned
for improved results. At the same time, Deere's financial-
services subsidiaries are expected to see continued margin
pressure, resulting from their highly competitive markets.
Based on these conditions, the company's worldwide physical
volume of sales is currently projected to decline by
approximately 13 to 15 percent in 1999, compared with 1998. In
this environment, the previously stated goal of reporting flat
earnings per share in 1999 is not achievable. First-quarter
physical volume is projected to be 23 to 25 percent below the
comparable level of first-quarter 1998.
According to Becherer, the present economic situation is
challenging the company to "balance our response to current
conditions with our ongoing need for investment in the future."
In this regard, he says Deere has reduced capital spending and
is aggressively managing costs and assets, while pursuing
further efficiency gains through various quality and supply-
management initiatives. At the same time, Becherer asserted, "We
fully intend to maintain our commitment to the key projects that
underlie our plans for global growth and long-term market-share
improvement."
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:
Page 7
John Deere Capital Corporation's net income was $47.8
million in the fourth quarter and $151.2 million for the year
compared with $39.3 million and $135.8 million for the same
periods last year. The fourth quarter and annual results
benefited from higher income on a larger average receivable and
lease portfolio and from higher gains on retail note sales,
partially offset by higher operating costs.
Net receivables and leases financed by John Deere Capital
Corporation were $6.446 billion at October 31, 1998, compared
with $6.217 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 year increased 14 percent
compared with the same period last year. Net receivables and
leases administered, which include receivables previously sold,
totaled $8.635 billion at October 31, 1998, compared with $7.531
billion at October 31, 1997.
Safe Harbor Statement
Safe Harbor Statement under the Private Securities
Litigation Reform Act of 1995. Statements under the "Market
Conditions and Outlook" heading and elsewhere herein, 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, commodity prices, weather conditions, real estate
values, animal diseases, crop pests, harvest yields, 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
(including the effect of conversion to the Euro by the European
Union); technological difficulties (including difficulties from
Year 2000 compliance, especially involving third parties, which
could cause the company to be unable to take orders, manufacture
and ship product, and perform other essential functions);
accounting standards; and other risks and uncertainties.
Economic difficulties in Asia and other parts of the world could
continue to adversely affect North American grain and meat
exports. The number of housing starts is especially important to
sales of construction equipment. Sales of commercial and
consumer equipment during the winter are affected by the amount
and timing of snowfall. 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.
Page 8
Fourth Quarter and 1998 Press Release
Net sales and revenues:
(millions of dollars except per share amounts)
Three Months Ended
October 31
%
1998 1997 Change
Net sales: ------ ------ ------
Agricultural equipment $1,579 $1,919 - 18
Construction equipment 584 632 - 8
Commercial and consumer equipment 530 428 + 24
------ ------
Total net sales 2,693 2,979 - 10
Financial Services revenues 476 419 + 14
Other revenues 43 46 - 7
------ ------
Total net sales and revenues $3,212 $3,444 - 7
====== ======
United States and Canada:
Equipment net sales $2,010 $2,270 - 11
Financial Services revenues 476 419 + 14
------ ------
Total 2,486 2,689 - 8
Overseas net sales 683 709 - 4
Other revenues 43 46 - 7
------ ------
Total net sales and revenues $3,212 $3,444 - 7
====== ======
Operating profit:
Agricultural equipment $ 110 $ 260 - 58
Construction equipment 43 40 + 8
Commercial and consumer equipment 54 6 +800
------ ------
Equipment Operations* 207 306 - 32
Financial Services 80 43 + 86
------ ------
Total operating profit 287 349 - 18
Interest and corporate expenses-net (49) (33) + 48
Income taxes (76) (105) - 28
------ ------
Net income $ 162 $ 211 - 23
====== ======
Per Share:
Net income $ .71 $ .84 - 15
Net income - diluted $ .71 $ .83 - 14
* Includes overseas operating profit $ 31 $ 11 +182
====== ======
Page 9
Fourth Quarter and 1998 Press Release
Net sales and revenues:
(millions of dollars except per share amounts)
Twelve Months Ended
October 31
%
1998 1997 Change
Net sales: ------ ------ ------
Agricultural equipment $ 7,217 $ 7,048 + 2
Construction equipment 2,585 2,262 + 14
Commercial and consumer equipment 2,124 1,772 + 20
------ ------
Total net sales 11,926 11,082 + 8
Financial Services revenues 1,737 1,554 + 12
Other revenues 159 155 + 3
------ ------
Total net sales and revenues $13,822 $12,791 + 8
====== ======
United States and Canada:
Equipment net sales $ 8,877 $ 8,018 + 11
Financial Services revenues 1,737 1,554 + 12
------ ------
Total 10,614 9,572 + 11
Overseas net sales 3,049 3,064
Other revenues 159 155 + 3
------ ------
Total net sales and revenues $13,822 $12,791 + 8
====== ======
Operating profit:
Agricultural equipment $ 962 $1,072 - 10
Construction equipment 300 216 + 39
Commercial and consumer equipment 214 114 + 88
------ ------
Equipment Operations* 1,476 1,402 + 5
Financial Services 271 214 + 27
------ ------
Total operating profit 1,747 1,616 + 8
Interest and corporate expenses-net (172) (105) + 64
Income taxes (554) (551) + 1
------ ------
Net income $1,021 $ 960 + 6
====== ======
Per Share:
Net income $ 4.20 $ 3.78 + 11
Net income - diluted $ 4.16 $ 3.74 + 11
* Includes overseas operating profit $ 299 $ 301 - 1
====== ======
Page 10
Fourth Quarter and 1998 Press Release
Selected balance sheet data: October 31 October 31
(millions of dollars and shares) 1998 1997
------ ------
Equipment Operations:
Trade accounts and notes
receivable-net $4,059 $3,334
Inventories $1,287 $1,073
Financial Services:
Financing receivables and leases
financed - net $7,237 $6,902
Financing receivables and leases
administered - net $9,625 $8,416
Insurance companies' assets $ 995 $ 994
Health care companies' assets $ 234 $ 233
Average shares outstanding 243.3 253.7
Page 11