Deere & Company (DE) Q4 2009 earnings summary

Executive summary

• FY09 net income was $873M, or $2.06 diluted EPS, versus $2,053M and $4.70 in FY08; net sales and revenues fell 19% to $23,112M.

• Results included $381M pretax ($332M after tax), or $0.78 per share, in goodwill impairment and voluntary separation charges.

• Lower equipment volumes and currency effects weighed on results; improved pricing and lower selling, administrative and general expenses partly offset the pressure.

Financial highlights

• Equipment Operations sales declined 20% to $20,756M; lower shipment volumes drove the decrease, with 4% unfavorable currency effects partly offset by 5% price realization.

• Equipment Operations operating profit fell to $1,365M from $2,927M; segment net income was $678M versus $1,676M.

• Financial Services net income declined to $203M from $337M, mainly on higher credit-loss provisions, narrower financing spreads and increased construction lease residual losses.

• Trade receivables and inventories totaled $5,014M at year-end, down from $6,276M; both equaled 24% of annual net sales.

Outlook and guidance

• FY10 equipment sales forecast down 1%, with a favorable currency translation impact of 1%; Q1 sales forecast down 10%, including a favorable 3% currency impact.

• FY10 net income forecast at approximately $900M; postretirement benefit costs expected to rise about $400M pretax, primarily due to lower discount rates.

• Agriculture and turf sales forecast down 4% for FY10, including a favorable 2% currency impact; construction and forestry sales forecast up about 18%.

• Credit operations FY10 net income forecast at approximately $240M, supported by higher crop insurance commissions and wind energy revenue.