10-KPeriod: FY2002

DEERE & CO Annual Report, Year Ended Oct 31, 2002

Filed December 20, 2002For Securities:DE

Summary

Deere & Company (DE) has reported a significant turnaround in its fiscal year ended October 31, 2002, moving from a net loss of $64 million in 2001 to a net income of $319 million. This improvement was driven by better price realization, effective cost reduction initiatives, and positive customer response to new products across its agricultural and commercial and consumer equipment segments. The company's financial services segment also demonstrated strength, with net income increasing to $262 million. Looking ahead, Deere & Company projects continued growth, forecasting equipment sales to increase by 8-10% for the full fiscal year 2003. This optimism is supported by expected improvements in agricultural commodity prices, new product introductions like the 100-series lawn tractors, and a strategic marketing agreement with Hitachi Construction Machinery. The company is also managing its financial structure effectively, with credit operations expected to see a more than 20% increase in net income.

Key Highlights

  • 1Significant recovery in net income, swinging from a $64 million loss in FY2001 to $319 million in FY2002.
  • 2Consolidated net sales increased by 5% to $13.95 billion in FY2002.
  • 3Equipment Operations saw a 6% increase in net sales, driven by overseas agricultural equipment and commercial/consumer segments, though construction and forestry sales lagged.
  • 4Financial Services segment net income rose to $262 million, a substantial increase from $192 million in FY2001.
  • 5Strong consolidated cash flow from operations of $1.9 billion in FY2002.
  • 6Company forecasts full-year 2003 equipment sales to increase by 8-10% and enterprise net income to be between $500 million and $600 million.
  • 7Adoption of FASB Statement No. 142 in FY2003 is expected to provide a favorable $53 million after-tax impact by eliminating goodwill expense.

Frequently Asked Questions

Deere & Company's improved performance was primarily driven by better price realization on its equipment, successful implementation of broad-based cost and expense reduction initiatives, and a favorable customer response to new products. These factors contributed to higher sales and more efficient production levels across its key segments. Additionally, a significant reduction in trade receivables and inventories helped bolster consolidated cash flow from operations.

Deere & Company anticipates continued growth in fiscal year 2003, forecasting equipment sales to increase by 8-10% and enterprise net income to range between $500 million and $600 million. Growth is expected to be supported by firming agricultural commodity prices, new product launches such as the 100-series lawn tractors, and an expansion in Western Europe. The company also expects its credit operations to see a significant increase in net income, exceeding 20%.

The company incurred special charges related to closing and restructuring facilities and a voluntary early-retirement program. In 2002, these charges amounted to $46 million (or $0.18 per diluted share), and in 2001, they totaled $217 million (or $0.91 per diluted share). Excluding these special items, net income in 2002 more than doubled to $365 million from $153 million in 2001, highlighting the underlying operational improvements.

Deere & Company's financial services segment plays a crucial role in supporting equipment sales. In fiscal year 2002, the company began purchasing trade receivable portfolios from its Equipment Operations in Europe, mirroring a similar arrangement in the United States. This strategy aims to better align its capital structure and incentives, reduce asset intensity, and enhance the financial services segment's profitability through income earned on trade receivables and improved interest rate spreads.