Deere & Company (DE) Q4 2008 earnings summary

Executive summary

• FY08 net income was $2.053B, up from $1.822B; diluted EPS rose to $4.70 from $4.00. Net sales and revenues increased 18% to $28.438B.

• Equipment Operations operating profit increased to $2.927B from $2.318B, driven by higher shipment volumes and improved price realization; higher raw-material costs and expenses partly offset gains.

Financial highlights

• Equipment Operations net sales rose 20% to $25.803B; reported growth included a 4% positive currency effect and 2% from price changes.

• Operating cash flow was $1.949B; cash used in investing was $1.426B and cash used in financing was $649M. Cash and equivalents ended FY08 at $2.211B.

• Cost of sales was 75.9% of net sales, versus 75.6% in FY07, reflecting higher raw-material costs partly offset by volume and price realization.

Outlook and guidance

• FY09 equipment sales are forecast flat, with Q1 up 7%; both forecasts include an estimated 6% negative currency-translation impact. FY09 net income is forecast at $1.9B and Q1 at $275M.

• Worldwide agricultural equipment sales are forecast up 5% in FY09, including an 8% negative currency impact; North American farm-machinery industry sales are forecast up 5%.

• Commercial and consumer sales are forecast down 6%; construction and forestry sales down 12%; credit operations net income is forecast at $300M, primarily reflecting narrower financing spreads.

• Equipment Operations capital expenditures are estimated at $1B for FY09, mainly for facility modernization, restructuring and product development; Financial Services capital expenditures are estimated at $125M, primarily for wind energy.