10-QPeriod: Q3 FY2010

DEERE & CO Quarterly Report for Q3 Ended Jul 31, 2010

Filed August 27, 2010For Securities:DE

Summary

Deere & Company's (DE) third quarter and nine-month results for the period ending July 31, 2010, show a significant rebound in performance compared to the previous year, driven by strong sales growth in its core equipment operations. Net income attributable to Deere & Company surged, with diluted earnings per share increasing substantially. The company's Agriculture and Turf segment experienced robust sales growth, bolstered by favorable market conditions in North America and South America. The Construction and Forestry segment also demonstrated a remarkable turnaround, with sales and operating profit shifting from a loss in the prior year to a profit. Financial Services also contributed positively with improved financing spreads and a lower provision for credit losses. Looking ahead, Deere & Company anticipates continued sales growth for the full fiscal year 2010, driven by strength in agriculture and construction markets, though with regional variations. The company maintains a cautious outlook regarding global economic conditions but expresses confidence in its liquidity and funding sources to meet its obligations.

Financial Highlights

43 data points
Beta

Revenue

$6.84B

24.9% Gross Margin

Net Income

$617.00M

9.0% Net Margin

EPS (Diluted)

$1.44

Total Assets

$41.81B

Cash & Equivalents

$3.75B

Free Cash Flow

$525.20M

Financial Statements
Beta
Revenue$6.84B
Cost of Revenue$4.52B
Gross Profit$1.70B
R&D Expenses$256.30M
SG&A Expenses$751.20M
Operating Income$1.04B
Interest Expense$193.10M
Net Income$617.00M
EPS (Basic)$1.45
EPS (Diluted)$1.44
Shares Outstanding (Basic)424.50M
Shares Outstanding (Diluted)429.00M

Key Highlights

  • 1Net income attributable to Deere & Company for the third quarter was $617.0 million, a significant increase from $420.0 million in the prior year's comparable period.
  • 2Diluted earnings per share rose to $1.44 for the third quarter, up from $0.99 in the prior year, indicating improved profitability on a per-share basis.
  • 3Worldwide net sales and revenues increased by 16% to $6,837 million in the third quarter, driven by an 18% increase in Net sales from Equipment Operations.
  • 4The Construction and Forestry segment showed a strong turnaround, with operating profit improving from a loss of $28 million in the prior year's third quarter to a profit of $66 million in the current quarter.
  • 5Financial Services reported an increase in operating profit to $138 million for the third quarter, driven by improved financing spreads and a lower provision for credit losses.
  • 6The company forecasts full-year 2010 equipment sales to increase by approximately 12%, with a particular strength expected in the fourth quarter.
  • 7Deere & Company maintained a stable credit rating with a 'Stable' outlook from both Moody's and Standard & Poor's.

Frequently Asked Questions

The primary driver of the significant increase in net income was the robust performance of the Equipment Operations, particularly the Agriculture and Turf segment, which saw higher shipment volumes and improved price realization. Additionally, the Construction and Forestry segment experienced a substantial turnaround, moving from a loss to profitability, further boosting overall net income.

The Financial Services segment demonstrated improved performance with an operating profit of $138 million, up from $95 million in the prior year's third quarter. This growth was primarily attributed to better financing spreads and a lower provision for credit losses, indicating a healthier credit portfolio and more favorable lending conditions.

Deere & Company anticipates continued growth for the full fiscal year 2010, with projected equipment sales to increase by approximately 12%. The company expects a particularly strong fourth quarter. While acknowledging global economic uncertainties, the company is optimistic about market conditions in key segments like agriculture and construction.

The company reported positive cash flows from operations and maintained access to various funding sources, including commercial paper, term debt, and securitization programs. As of July 31, 2010, Deere & Company had significant available lines of credit and solid credit ratings, indicating a stable liquidity position to meet its financial obligations.