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 26, 1996
(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 10 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.
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 26, 1996
EXHIBIT INDEX
Sequential
Number and Description of Exhibit Page Number
(99) Press release and additional information Pg. 5
EXHIBIT 99
Contact: Robert J. Combs
Deere & Company
309/765-5014
DEERE & COMPANY FOURTH QUARTER EARNINGS
For Immediate Release (November 26, 1996)
Moline, Illinois -- Deere & Company today reported record
fourth quarter worldwide net income of $173.9 million or $.68 per
share for the quarter ended October 31, an increase of 15 percent
compared with 1995 fourth quarter net income of $150.6 million or
$.57 per share. Net income for the fiscal year increased 16
percent to $817.3 million or $3.14 per share compared with $706.1
million or $2.71 per share last year. Deere & Company Chairman
and Chief Executive Officer Hans W. Becherer said, "Both the
fourth quarter and the full year results represent new company
earnings records. The company's operating margins remain strong
as our focus on continuous improvement and growth is having a
positive impact throughout our businesses."
Worldwide net sales and revenues increased seven percent to
$2.919 billion in the fourth quarter and nine percent to $11.229
billion for the year compared with $2.719 billion and $10.291
billion, respectively, last year. Net sales to dealers of
agricultural, industrial, and commercial and consumer equipment
were $2.488 billion in the fourth quarter and $9.640 billion this
year compared with $2.342 billion and $8.830 billion,
respectively, last year. Export sales from the United States
continued to grow, totaling $1.584 billion for 1996 compared with
$1.314 billion last year, an increase of over 20 percent.
Overseas sales for the year remained very strong, rising by 26
percent compared with a year ago and exceeding $2.5 billion for
the first time in the company's history. Overall, the company's
worldwide physical volume of sales increased four percent for the
quarter and seven percent for the year compared with a year ago,
reflecting the increased worldwide demand for the company's
products.
The company's worldwide equipment operations, which exclude
the financial services subsidiaries and unconsolidated
affiliates, had record net income of $123.4 million in the fourth
quarter and $610.0 million for the full year in 1996 compared
with $106.3 million and $529.0 million, respectively, last year.
Earnings for the year were at record levels despite the negative
impact of a fourth quarter $15 million after-tax write-off
associated with the integration and consolidation of our various
Mexican operations.
Worldwide agricultural equipment operating profits in 1996
were $202 million for the quarter and $821 million for the year
compared with $135 million and $643 million, respectively, last
year. The gains were primarily due to higher production and
sales levels coupled with lower sales incentive costs. Industrial
equipment operating profits totaled $34 million in the quarter
and $186 million for the entire year compared with $36 million
and $198 million, respectively, last year. The lower operating
profits in both the quarter and year resulted mainly from
increased development expenses associated with improving the fuel
efficiency and emissions performance of new engines. Worldwide
commercial and consumer equipment operating profits were $1
million for the quarter and $118 million for the full year
compared with $35 million and $165 million, respectively, last
year. Operating income decreased in both the quarter and full
year due primarily to lower sales volume and increased
promotional and growth expenditures associated with the
division's new market initiatives. Overseas results, prior to the
Mexican write-off, reflected operating income totaling $8 million
for the quarter and $273 million for the full year compared with
$4 million and $167 million, respectively, last year. These
improvements were driven by higher volumes of production and
sales, continued cost improvements and operating efficiencies.
Net income of the financial services subsidiaries was $47.6
million for the quarter and $196.8 million for the entire year
compared with $41.0 million and $166.6 million, respectively,
last year. The credit operation's fourth quarter and annual net
income was $36.9 million and $146.6 million, respectively,
compared with $28.8 million and $120.9 million for the same
periods last year. The increase in income resulted primarily
from a larger average portfolio financed and increased income
from the securitization and sale of retail notes. Net income of
the insurance operations was $6.4 million for the quarter and
$32.7 million for the year compared with $8.3 million and $29.4
million, respectively, last year. Fourth quarter results were
impacted by unfavorable claims experience and lower investment
income. Annual results continued to reflect an overall
improvement in underwriting results, offset by lower investment
income. Health care operations' net income increased to $4.3
million for the quarter and $17.5 million for the year, despite
higher expenditures on growth initiatives, compared with $3.9
million and $16.3 million, respectively, last year.
The company's asset control efforts continued to generate
improved results in 1996, with the equipment operations' ratio of
year-end assets to net sales decreasing from 76 percent in 1995
to 71 percent in 1996. The ratio of year-end dealer receivables
to net sales also improved from 37 percent of net sales last year
to 33 percent in 1996.
Market Conditions and Outlook
"Worldwide demand for John Deere agricultural equipment
remains very strong," Becherer said. "Favorable weather
conditions in the major producing areas in North America,
combined with the removal of all annual acreage reduction
programs in the United States, resulted in significant increases
in production of wheat, corn and soybeans in 1996. However,
despite recent price declines, grain prices remain at reasonably
good overall levels.
"Improving worldwide dietary trends and rapid income growth
in most of Asia and Latin America continue to stimulate strong
demand for farm commodities, resulting in the need for high
levels of future plantings," Becherer said. "Additionally, many
United States farmers signed seven-year production flexibility
contracts that establish direct government payments until the
year 2002. The payments are not dependent on commodity price
levels. During 1996, this program permits estimated payments to
farmers of nearly $9 billion. As a result of these factors and
the USDA's projections for continued relatively tight supplies of
grains and oilseeds during next year, farmers' confidence has
remained at high levels, promoting strong North American demand
for agricultural equipment. Additionally, overseas agricultural
equipment sales, which were very strong during 1996, are also
expected to continue to increase in 1997 due principally to the
impact of sales to republics of the former Soviet Union,
including countries such as Ukraine and Kazakhstan.
"Industrial equipment markets also remained strong in 1996,"
Becherer said. "Housing demand continued at strong levels in
1996, reflecting generally favorable mortgage interest rates, and
demand is expected to remain at approximately the same levels in
1997. Strong housing demand coupled with general expectations
for moderate economic growth in the domestic economy should
promote continued good industrial equipment demand for next year.
"Commercial and consumer equipment industry sales were
negatively affected this year by a cold, wet spring followed by a
cool and dry summer, resulting in retail sales approximately
equal to 1995 levels," Becherer said. "However, the first 'Sabre
by John Deere' products were introduced during 1996, opening a
new market segment to the company. Retail sales volumes in 1997
are currently expected to increase moderately over 1996 levels,
assuming more normal weather patterns, growth of the Sabre brand
and a continuing strong economy.
"The company's financial services operations, which
experienced growth in most markets served in 1996, also are
expected to continue their profitable growth next year, partially
offset by the credit operations' planned lower gains on note
sales and higher expenditures for key growth initiatives,"
Becherer said.
"In response to these market conditions, the company's
worldwide physical volume of sales to dealers on a comparable
basis is projected to increase by approximately five percent in
1997 compared with 1996," Becherer said. "First quarter physical
volumes are also projected to be six percent higher than the
comparable levels in the first quarter of 1996.
"Overall, the outlook for our businesses is positive,"
Becherer said. "We are continuing to invest in new growth
initiatives throughout the world which should promote the sale of
new as well as existing products in new markets such as China,
the republics of the former Soviet Union and India. Our
excellent worldwide dealer organization continues to successfully
provide a strong and critically important linkage to our
customers, assisting us in meeting their ever increasing
expectations and reinforcing our commitment to their
satisfaction. The company's operating margins have also
benefited from our growth and continuous improvement initiatives.
Based on these factors, coupled with the continued favorable
market outlook for our businesses, we expect another strong
operating performance next year."
John Deere Capital Corporation
The following is disclosed on behalf of the company's United
States 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 $31.6
million in the fourth quarter of 1996 and $134.1 million for the
entire year compared with $27.1 million and $114.1 million,
respectively, last year. Net income for the quarter and year
were favorably affected by a larger portfolio financed and
increased income from the securitization and sale of retail
notes. The average balance of credit receivables and leases
financed was 16 percent higher in the fourth quarter and 20
percent higher for the year compared with a year ago.
Credit receivable and lease acquisition volumes increased
nine percent during the fourth quarter and 18 percent for the
year compared with last year. Volumes of John Deere notes were
six percent higher in the current year, primarily due to
increased retail sales of John Deere equipment. Volumes of
retail notes, revolving charge accounts, leases and wholesale
receivables all increased in 1996 compared with last year.
Annual 1996 retail note volumes totaled $2.981 billion, a four
percent increase over 1995.
Net receivables and leases financed by John Deere Capital
Corporation were $5.536 billion at October 31, 1996 compared with
$4.838 billion one year ago. The increase resulted from credit
acquisitions exceeding collections during 1996, partially offset
by retail note sales during the same period. Net credit
receivables and leases administered, which include receivables
previously securitized and sold, totaled $6.724 billion at
October 31, 1996 compared with $6.021 billion at October 31,
1995.
Safe Harbor Statement
Safe Harbor Statement under the Private Securities
Litigation Reform Act of 1995: Statements under the "Market
Conditions and Outlook" heading that 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, industrial
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; labor relations; interest and
currency exchange rates; accounting standards; and other risks
and uncertainties. Further information concerning the company and
its businesses, including factors that potentially could
materially affect the company's financial results, is contained
in the company's filings with the Securities and Exchange
Commission.
# # #
The attached data accompany this press release.
Fourth Quarter and 1996 Press Release
Net sales and revenues:
(millions of dollars)
Three Months Ended Twelve Months Ended
October 31 October 31
% %
1996 1995 Change 1996 1995 Change
Net sales:
Agricultural
equipment 1,660 1,456 +14 6,097 5,277 +16
Industrial equipment 465 463 1,919 1,875 + 2
Commercial and
consumer equipment 363 423 -14 1,624 1,678 - 3
Total net sales 2,488 2,342 + 6 9,640 8,830 + 9
Financial Services
revenues 387 335 +16 1,446 1,335 + 8
Other revenues 44 42 + 5 143 126 +13
Total net sales
and revenues 2,919 2,719 + 7 11,229 10,291 + 9
United States and Canada:
Equipment net sales 1,836 1,780 + 3 6,886 6,648 + 4
Financial Services
revenues 387 335 +16 1,446 1,335 + 8
Total 2,223 2,115 + 5 8,332 7,983 + 4
Overseas net sales 652 562 +16 2,754 2,182 +26
Other revenues 44 42 + 5 143 126 +13
Total net sales
and revenues 2,919 2,719 + 7 11,229 10,291 + 9
Operating profit*:
Agricultural equipment 202 135 +50 821 643 +28
Industrial equipment 34 36 - 6 186 198 - 6
Commercial and consumer
equipment 1 35 -97 118 165 -28
Financial Services 74 63 +17 303 261 +16
Total operating
profit 311 269 +16 1,428 1,267 +13
Interest and corporate
expenses - net (23) (38) -39 (131) (163) -20
Income taxes (114) (80) +43 (480) (398) +21
Net income 174 151 +15 817 706 +16
Selected balance sheet data:
(millions of dollars)
October 31 October 31
1996 1995
Equipment Operations:
Dealer accounts and notes
receivable - net 3,153 3,260
Inventories 829 721
Financial Services:
Credit receivables and leases
financed - net 6,086 5,366
Credit receivables and leases
administered - net 7,487 6,666
Insurance companies' assets 1,068 1,127
Health care companies' assets 236 237
Average shares outstanding 260,547,221 260,494,446
* 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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