10-QPeriod: Q1 FY2010

DEERE & CO Quarterly Report for Q1 Ended Jan 31, 2010

Filed March 1, 2010For Securities:DE

Summary

Deere & Company's first quarter 2010 results show a rebound in profitability compared to the prior year, driven by improved financing spreads in its Financial Services segment and cost management in its Equipment Operations. While overall net sales and revenues saw a slight decline year-over-year, the company demonstrated resilience, with net income attributable to Deere & Company increasing by 19%. This improvement was supported by a favorable mix of products and pricing, alongside effective cost controls. The company's outlook for fiscal year 2010 projects a rebound in equipment sales, particularly in construction and forestry, and sustained profitability in financial services. Despite ongoing concerns about the global economic recovery and credit market conditions, Deere & Company maintains access to liquidity and is strategically positioned to capitalize on its established market presence and focus on long-term agricultural and infrastructure needs.

Financial Statements
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Key Highlights

  • 1Net income attributable to Deere & Company increased by 19% to $243.2 million, or $0.57 per share, from $203.9 million, or $0.48 per share, in the prior year's first quarter.
  • 2Worldwide net sales and revenues decreased by 6% to $4.835 billion, reflecting a 7% decline in Equipment Operations' net sales to $4.237 billion.
  • 3The Financial Services segment reported a significant increase in net income to $85.1 million, up from $46.8 million in the prior year, primarily due to improved financing spreads.
  • 4Operating profit for the Equipment Operations improved due to lower raw material costs, better price realization, and favorable currency effects, partially offset by lower shipment volumes.
  • 5The company forecasts a rebound in equipment sales for fiscal year 2010, projecting a 6-8% increase, with construction and forestry sales expected to rise approximately 21%.
  • 6Deere & Company ended the quarter with a strong liquidity position, with $5.043 billion in cash and cash equivalents.
  • 7Despite a challenging economic environment, the company's credit rating remains solid (A2/A from Moody's/S&P), indicating continued financial stability.

Frequently Asked Questions

Deere & Company demonstrated improved financial performance in the first quarter of 2010. Net income attributable to Deere & Company rose by 19% to $243.2 million ($0.57 per share) compared to $203.9 million ($0.48 per share) in the first quarter of 2009. This increase was driven by higher net income from Financial Services and operational improvements in Equipment Operations, despite a 6% decrease in worldwide net sales and revenues.

The company anticipates a positive full fiscal year 2010, forecasting equipment sales to increase by 6-8%. The Construction and Forestry segment is expected to see a significant rebound with projected sales growth of approximately 21%. Net income attributable to Deere & Company for the full year is projected to be around $1.3 billion.

The 'Agriculture and Turf' segment saw its operating profit increase by 22% due to lower raw material costs and improved pricing, although segment sales declined 6%. The 'Construction and Forestry' segment experienced a decline in sales and an operating loss for the quarter, reflecting depressed market conditions. The 'Credit' segment was a strong performer, with operating profit up 77% driven by improved financing spreads.

Deere & Company maintained a strong liquidity position, with $5.043 billion in cash and cash equivalents at the end of the quarter. The company has access to various funding sources, including commercial paper, term debt, and securitization of retail notes. Its credit ratings remain stable, facilitating access to capital markets at reasonable costs.