10-KPeriod: FY2009

DEERE & CO Annual Report, Year Ended Oct 31, 2009

Filed December 17, 2009For Securities:DE

Summary

Deere & Company's (DE) 2009 10-K filing reflects a challenging year impacted by a global economic downturn. The company experienced a significant decline in net sales and revenues, down 19% to $23.1 billion, with net income dropping to $873 million from $2.1 billion in the prior year. This performance was primarily driven by reduced shipment volumes across both the Agriculture and Turf and Construction and Forestry segments, exacerbated by unfavorable currency translation effects. The company also incurred charges related to goodwill impairment and voluntary employee separations. Despite the downturn, Deere maintained its financial condition and continued strategic investments, particularly in research and development for emissions-compliant engines. The company's outlook for fiscal year 2010 anticipates a modest recovery, with projected net income of approximately $900 million. While industry sales for agriculture and turf equipment are expected to decline slightly, construction and forestry markets are forecast to see a significant increase. The financial services segment is also projected to improve its net income. Key risks identified include ongoing global economic uncertainty, capital market disruptions, credit availability for customers, and evolving regulatory environments, particularly concerning environmental standards.

Financial Highlights

31 data points
Beta

Revenue

$23.11B

29.7% Gross Margin

Net Income

$873.50M

3.8% Net Margin

EPS (Diluted)

$2.06

Free Cash Flow

$1.08B

Financial Statements
Beta
Revenue$23.11B
Cost of Revenue$16.26B
Gross Profit$6.86B
R&D Expenses$977.00M
SG&A Expenses$2.78B
Operating Income$1.61B
Interest Expense$1.04B
Net Income$873.50M
EPS (Basic)$2.07
EPS (Diluted)$2.06
Shares Outstanding (Basic)422.80M
Shares Outstanding (Diluted)424.40M

Key Highlights

  • 1Net sales and revenues decreased by 19% to $23.1 billion in fiscal year 2009, down from $28.4 billion in 2008.
  • 2Net income for fiscal year 2009 was $873 million, a significant decrease from $2.1 billion in fiscal year 2008.
  • 3The company incurred charges of $381 million pre-tax ($332 million after-tax) in 2009 related to goodwill impairment and voluntary employee separation expenses.
  • 4The Agriculture and Turf segment experienced a 14% decline in net sales, while the Construction and Forestry segment saw a substantial 45% decrease in net sales.
  • 5The Financial Services segment's net income decreased to $203 million from $337 million in 2008, primarily due to a higher provision for credit losses.
  • 6Deere & Company anticipates a net income of approximately $900 million for fiscal year 2010, indicating expectations for a recovery.
  • 7The company repurchased shares under its stock repurchase plan, with 123.5 million shares remaining to be repurchased as of October 31, 2009.

Frequently Asked Questions

The primary drivers were the severe global economic downturn, which led to reduced shipment volumes across both the Agriculture and Turf and Construction and Forestry segments. Unfavorable currency translation effects also contributed to the decline in net sales. Additionally, the company incurred charges related to goodwill impairment and voluntary employee separations, further impacting net income.

Deere & Company projects net income of approximately $900 million for fiscal year 2010. The outlook anticipates a stronger performance in the Construction and Forestry segment, with sales forecast to increase by about 18%, and some recovery in global forestry markets. The Agriculture and Turf segment is expected to see a slight decline in sales, while the Financial Services segment's net income is projected to increase.

The company faces significant risks from ongoing global economic uncertainty and a slow recovery, capital market disruptions, and the availability of credit for its customers and suppliers. Changes in governmental policies, including financial regulatory reform, and fluctuating foreign currency exchange rates and commodity prices are also key concerns. Additionally, meeting increasingly stringent engine emissions regulations presents an ongoing operational challenge.

The Financial Services segment's net income decreased to $203 million in 2009 from $337 million in 2008. This decline was primarily due to a higher provision for credit losses, narrower financing spreads, and increased losses from construction equipment operating lease residual values. These factors were partially offset by a lower effective tax rate, largely due to wind energy tax credits.