10-QPeriod: Q3 FY2008

DEERE & CO Quarterly Report for Q3 Ended Jul 31, 2008

Filed September 2, 2008For Securities:DE

Summary

Deere & Company (DE) reported strong financial results for the third quarter and first nine months of fiscal year 2008, driven by robust performance in its Agricultural Equipment segment. Net sales increased by 17% for both periods, reaching $7,739 million and $21,036 million, respectively. Net income also saw significant growth, up 7% to $575.2 million ($1.32 per share) for the quarter and 22% to $1,708 million ($3.89 per share) for the nine-month period, compared to the prior year. The company's performance was bolstered by favorable conditions in the global farm sector, leading to increased sales volumes and price realization, particularly in its Agricultural Equipment division, which saw a 35% sales increase in the quarter. While the Commercial and Consumer Equipment segment showed a slight decline, and the Construction and Forestry segment experienced a decrease due to market pressures, the overall strength in agriculture significantly offset these impacts. Deere & Company's financial position remains solid, with total assets growing and a strong liquidity position supported by diverse funding sources. The company also announced a significant share repurchase program and plans to close a manufacturing facility in Ontario, Canada, which is expected to result in restructuring charges in the fourth quarter.

Financial Highlights

40 data points
Beta

Revenue

$7.74B

29.9% Gross Margin

Net Income

$575.20M

7.4% Net Margin

EPS (Diluted)

$1.32

Total Assets

$41.69B

Cash & Equivalents

$2.82B

Free Cash Flow

$311.40M

Financial Statements
Beta
Revenue$7.74B
Cost of Revenue$5.42B
Gross Profit$2.32B
R&D Expenses$238.10M
SG&A Expenses$772.00M
Interest Expense$270.20M
Net Income$575.20M
EPS (Basic)$1.34
EPS (Diluted)$1.32
Shares Outstanding (Basic)429.30M
Shares Outstanding (Diluted)434.40M

Key Highlights

  • 1Net sales for the third quarter increased 17% to $7.07 billion, with Agricultural Equipment sales up 35%.
  • 2Net income for the quarter rose 7% to $575.2 million, or $1.32 per diluted share.
  • 3For the first nine months, net sales grew 17% to $19.07 billion, and net income increased 22% to $1.71 billion, or $3.89 per diluted share.
  • 4The company reported strong performance in international markets, with net sales outside the U.S. and Canada increasing 38% in the third quarter.
  • 5The Construction and Forestry segment experienced a 7% sales decline due to U.S. market conditions.
  • 6Deere & Company announced a new share repurchase program authorizing up to $5 billion of common stock.
  • 7The company expects to incur approximately $90 million in after-tax charges related to the closure of its Welland, Ontario manufacturing facility.

Frequently Asked Questions

Revenue growth was primarily driven by a substantial increase in sales for the Agricultural Equipment segment, which saw a 35% increase. This was fueled by strong demand in the global farm sector, higher shipment volumes, improved price realization, and positive currency translation effects. Sales outside the U.S. and Canada also contributed significantly to the overall revenue increase.

The strong global farm sector provided a significant tailwind, boosting the Agricultural Equipment segment. However, the U.S. housing slowdown and economic downturn put pressure on the Construction and Forestry segment, leading to a 7% sales decline. The Commercial and Consumer Equipment segment saw a slight 1% decline in sales for the quarter, impacted by market conditions, although it benefited from a recent acquisition.

Deere & Company projected equipment sales to increase by approximately 21% for the full year 2008, with Agricultural Equipment sales expected to grow about 38%. Key concerns include rising raw material costs impacting margins, the availability of certain components, and the general economic slowdown and credit issues affecting markets. The company also anticipates approximately $90 million in after-tax charges related to a facility closure in the fourth quarter.

Deere & Company maintained a solid liquidity position, with cash and cash equivalents and marketable securities totaling approximately $3.8 billion. Sources of liquidity include operating cash flows, commercial paper, term debt, securitization of retail notes, and committed bank lines of credit. The company expects sufficient liquidity to meet its ongoing funding needs.