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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: May 19, 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.)
John Deere Road
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.
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Item 7. Financial Statements, Pro Forma Financial Information
and Exhibits.
(c) Exhibits
(99) Press release and additional information.
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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
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Frank S. Cottrell, Secretary
Dated: May 19, 1998
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Exhibit Index
Sequential
Number and Description of Exhibit Page Number
- - --------------------------------- -----------
(99) Press release and additional information Pg. 5
Page 4
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EXHIBIT 99
Curtis G. Linke
(Deere Logo) Deere & Company
(309)765-4634
RECORD SECOND QUARTER 1998 EARNINGS
RESULT IN 18% INCREASE IN EARNINGS PER SHARE
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For Immediate Release (19 May 1998)
MOLINE, IL -- Deere & Company today reported record
worldwide net income of $365.2 million, or $1.48 per share, for
the second quarter ended April 30, an increase of 14 percent in
net income and 18 percent in earnings per share compared with
$319.5 million, or $1.25 per share, in the second quarter of
1997. Net income for the first six months was $568.5 million, or
$2.29 per share, an increase of 15 percent in net income and 18
percent in earnings per share compared with $496.2 million, or
$1.94 per share, for the same period last year. Earnings per
share continued to benefit from the share repurchase program.
Once again, strong revenue growth, excellent customer
response to new products and continuing progress in quality
initiatives were the primary drivers of the company's earnings
performance. "These results are particularly gratifying," Hans
W. Becherer, chairman and chief executive officer, said, "as we
continue to make significant investments in quality and growth
initiatives to help enhance our leadership in the global
marketplace."
Worldwide net sales and revenues for the second quarter rose
16 percent to $4.070 billion and 17 percent to $6.916 billion
for the first six months of 1998, compared with $3.521 billion
and $5.917 billion, respectively, for the same periods last
year. Net sales of the agricultural, construction, and
commercial and consumer equipment divisions increased 16 percent
to $3.610 billion for the quarter and 18 percent to $6.015
billion for the first six months, compared with $3.108 billion
and $5.110 billion for the same periods a year ago. These
increases were in response to strong retail demand for the
company's products. Export sales from the United States
increased to $562 million for the second quarter and $1.014
billion for the first six months, compared with $547 million and
$939 million, respectively, for the same periods last year.
Overseas sales remained at favorable levels; however, they were
affected by weaker foreign currencies and were slightly lower
than last year for both the quarter and the year-to-date.
Overall, the company's physical volume of sales increased 19
percent for the first six months of 1998 compared with the first
half a year ago.
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Worldwide equipment operations, which exclude the financial
services subsidiaries and unconsolidated affiliates, had record
net income of $321.3 million for the second quarter and $488.2
million for the first six months compared with $278.6 million
and $414.0 million for the same periods last year. Worldwide
equipment operating profit increased to $551 million for the
quarter and to $839 million for the first six months of 1998
compared with $474 million for the quarter and $711 million for
the first six months of last year. Operating profit as a percent
of net sales was 15 percent for the quarter and 14 percent for
the first six months, the same as last year. Progress in quality
initiatives allowed the company to maintain favorable margins
despite increasingly competitive markets and continued spending
on growth initiatives.
. Worldwide agricultural equipment operating profit increased
7 percent to $364 million for the quarter and 7 percent to $570
million for the first six months compared with $339 million and
$534 million, respectively, for the same periods last year.
These increases resulted from higher sales and production
volumes partially offset by higher sales incentive costs, higher
expenses related to growth initiatives and a less favorable
sales mix.
. Worldwide construction equipment division operating profit
increased 18 percent to $91 million for the quarter and 35
percent to $155 million for the first six months, compared with
$77 million and $115 million for the same periods last year,
primarily reflecting higher sales and production volumes.
Improved efficiencies helped to partially offset higher growth
expenditures, higher sales incentive costs, and start-up
expenses primarily at the new engine facility in Torreon,
Mexico.
. Worldwide commercial and consumer equipment operating
profit increased 66 percent to $96 million for the quarter and
84 percent to $114 million for the first six months compared
with $58 million for the quarter and $62 million for the same
periods last year. This outstanding performance resulted from
higher sales and production volumes driven by strong demand for
the company's products, as well as improved operating
efficiencies. Results in 1998 included higher expenses related
to new products and the start-up of manufacturing facilities.
Last year's results were adversely affected by a write-off
related to a Homelite product.
Trade receivables and company inventories increased, as
expected, due to the higher sales volume. Equipment operations
assets at April 30, 1998, were 77.6 percent of the last 12
months' net sales, compared with 75.8 percent a year ago. The
higher ratio is primarily due to increased prepaid pension cost
assets.
Net income of the financial services subsidiaries was $41.2
million for the quarter and $77.2 million for the first six
months, compared with $40.2 million and $83.5 million for the
same periods last year.
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. Net income of the credit operations increased to $35.3
million for the second quarter and to $68.1 million for the
year-to-date, compared with $31.6 million and $64.6 million for
the same periods last year. The 1998 second quarter and year-to-
date results benefited from gains on sales of recreational
vehicle retail notes and higher income from a larger average
receivable and lease portfolio, partially offset by narrower
financing spreads, higher write-offs of receivables and higher
operating expenses.
. Net income of the insurance operations was $4.3 million for
the second quarter and $9.8 million for the first six months
compared with last year's results of $8.2 million and $17.1
million for the respective periods. This primarily reflects less
favorable underwriting results, lower premium volumes due to
competitive market conditions and lower investment income.
. The health care operations had net income of $1.6 million
for the quarter and incurred a loss of $.7 million for the first
six months, compared with net income of $.4 million and $1.8
million for the same periods last year. Despite lower margins at
the beginning of the year and competitive industry conditions,
significant progress is being made to improve the profitability
of the business.
OUTLOOK
The company's record results for the first six months were
in line with expectations. Better than anticipated crops in the
Southern hemisphere continued to put downward pressure on corn,
wheat and soybean prices; however, consumption is rising and
carryover stocks, although higher in the United States, are
slightly below average on a worldwide basis. United States farm
cash receipts are expected to be slightly below the high levels
of the previous two years, but farmers' balance sheets are
continuing to improve as a result of rising farmland prices and
low interest rates. Overall fundamentals of the farm economy are
sound, and the demand for farm equipment is expected to remain
favorable.
New products, low interest rates and solid economic growth
continue to bolster construction equipment demand. Housing
starts are expected to be slightly higher than last year's
level, and expenditures for highways and streets should grow
following the expected approval of pending federal highway
legislation.
Sales of commercial and consumer equipment should benefit
from favorable customer response to the company's line of new
products, as well as high levels of consumer confidence and a
strong housing market.
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The credit operations should benefit from the strong demand
for John Deere products. The insurance operations continue to
face competitive market conditions, and their results are
expected to be below last year's. The health care operations'
margins continue under pressure from a very competitive
environment; however, improvement plans are on target and are
expected to result in significantly improved financial results
in the remainder of 1998 compared to a year ago.
Based on these conditions, the company's worldwide physical
volume of sales is currently projected to increase by
approximately 10 to 12 percent in 1998 compared with 1997. Third
quarter physical volumes are projected to be 10 to 14 percent
higher than comparable levels for the third quarter of 1997.
In summarizing the favorable results for Deere & Company,
Mr. Becherer said, "We look forward to a continued strong
performance in 1998, reflecting gains from our quality
improvement efforts and the strong demand throughout the world
for our line of products. With our investments in new facilities
and new innovative products, we look forward to market share
growth and continued high levels of customer satisfaction."
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 $32.9 million in the second quarter
and $63.5 million for the first six months of 1998 compared with
$29.0 million and $58.7 million for the same periods last year.
The 1998 second quarter and year-to-date results benefited from
gains of $10.3 million on sales of recreational vehicle retail
notes and higher income from a 12 percent increase in the
average balance of receivables and leases financed during the
first six months. These results were partially offset by
narrower financing spreads, higher write-offs of receivables and
higher operating expenses.
Net receivables and leases financed by John Deere Capital
Corporation were $6.812 billion at April 30, 1998, compared with
$6.146 billion one year ago. The increase resulted from
acquisitions exceeding collections during the last 12 months,
partially offset by the previously mentioned sales of
recreational vehicle retail notes and other retail note sales
during the same period. Receivable and lease acquisition volumes
during the first six months increased 12 percent compared with
the same period last year. Net receivables and leases
administered, which include receivables previously sold, totaled
$7.790 billion at April 30, 1998 compared with $6.866 billion at
April 30, 1997.
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SAFE HARBOR STATEMENT
Safe Harbor Statement under the Private Securities Litigation
Reform Act of 1995:
Statements under the "Market Conditions and 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 such as El Nino, 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 are especially important to
sales of construction equipment. Economic difficulties in Asia
could affect North American grain and meat export prospects. The
company's outlook is based upon assumptions relating to the
factors described above. These assumptions 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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Second Quarter 1998 Press Release
Net sales and revenues:
(millions of dollars except per share amounts)
Three Months Ended
April 30
%
1998 1997 Change
Net sales: ------ ------ ------
Agricultural equipment $2,217 $1,949 + 14
Construction equipment 715 591 + 21
Commercial and consumer equipment 678 568 + 19
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Total net sales 3,610 3,108 + 16
Financial Services revenues 424 381 + 11
Other revenues 36 32 + 13
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Total net sales and revenues $4,070 $3,521 + 16
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United States and Canada:
Equipment net sales $2,733 $2,221 + 23
Financial Services revenues 424 381 + 11
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Total 3,157 2,602 + 21
Overseas net sales 877 887 - 1
Other revenues 36 32 + 13
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Total net sales and revenues $4,070 $3,521 + 16
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Operating profit:
Agricultural equipment $ 364 $ 339 + 7
Construction equipment 91 77 + 18
Commercial and consumer equipment 96 58 + 66
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Equipment Operations* 551 474 + 16
Financial Services 64 62 + 3
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Total operating profit 615 536 + 15
Interest and corporate expenses-net (45) (28) + 61
Income taxes (205) (189) + 8
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Net income $ 365 $ 319 + 14
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Per Share:
Net income $ 1.48 $ 1.25 + 18
Net income - diluted $ 1.45 $ 1.24 + 17
* Includes overseas operating profit $ 105 $ 112 - 6
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Second Quarter 1998 Press Release
Net sales and revenues:
(millions of dollars except per share amounts)
Six Months Ended
April 30
%
1998 1997 Change
Net sales: ------ ------ ------
Agricultural equipment $3,668 $3,221 + 14
Construction equipment 1,293 1,052 + 23
Commercial and consumer equipment 1,054 837 + 26
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Total net sales 6,015 5,110 + 18
Financial Services revenues 825 735 + 12
Other revenues 76 72 + 6
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Total net sales and revenues $6,916 $5,917 + 17
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United States and Canada:
Equipment net sales $4,548 $3,635 + 25
Financial Services revenues 825 735 + 12
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Total 5,373 4,370 + 23
Overseas net sales 1,467 1,475 - 1
Other revenues 76 72 + 6
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Total net sales and revenues $6,916 $5,917 + 17
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Operating profit:
Agricultural equipment $ 570 $ 534 + 7
Construction equipment 155 115 + 35
Commercial and consumer equipment 114 62 + 84
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Equipment Operations* 839 711 + 18
Financial Services 121 129 - 6
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Total operating profit 960 840 + 14
Interest and corporate expenses-net (69) (49) + 41
Income taxes (323) (295) + 9
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Net income $ 568 $ 496 + 15
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Per Share:
Net income $ 2.29 $ 1.94 + 18
Net income - diluted $ 2.26 $ 1.92 + 18
* Includes overseas operating profit $ 162 $ 181 - 10
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Second Quarter 1998 Press Release
Selected balance sheet data: Apr 30 Oct 31 Apr 30
(millions of dollars and shares) 1998 1997 1997
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Equipment Operations:
Trade accounts and notes
receivable-net $4,384 $3,334 $3,640
Inventories $1,511 $1,073 $1,290
Financial Services:
Financing receivables and leases
financed - net $7,595 $6,902 $6,759
Financing receivables and leases
administered - net $8,713 $8,416 $7,615
Insurance companies' assets $ 985 $ 994 $1,008
Health care companies' assets $ 237 $ 233 $ 246
Average shares outstanding 248.1 253.7 255.3
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