Outdoor appliance maker Deere & Company (Moline, IL, U.S.) today reported that broad–based improvements across all businesses led to better results in the fourth quarter. Worldwide net income was U.S. $68.0 million, or $0.28 per share, for the quarter and $319.2 million, or $1.33 per share, for the year ended October 31. This compared with net losses of $320.1 million, or $1.36 per share, and $64.0 million, or $0.27 per share, respectively, last year.
Affecting all periods were the costs of previously announced restructuring actions. Excluding these costs, income for the fourth quarter was $77.1 million, or $0.32 per share, versus losses of $103.5 million, or $0.45 per share, last year. Full–year income without these charges more than doubled -- to $364.5 million, or $1.51 per share, compared with $152.6 million, or $0.64 per share in 2001 -- on a 5-percent increase in total net sales and revenues.
"Fourth quarter results benefited from improvements across all businesses," said Robert W. Lane, chairman and CEO. "While market conditions remain below normal, favorable customer response to new products has contributed to higher sales and more efficient production levels." Deere is also benefiting from initiatives aimed at controlling expenses and assets, he noted. "Administrative expenses were down for the year," Mr. Lane explained. "We also trimmed research and development costs while maintaining a strong new–product program."
These factors, in conjunction with a $323 million reduction in trade receivables and inventories, helped produce cash flow from operations of $1.9 billion for the year, well above 2001 levels. "This is evidence that our actions to fundamentally improve our operations are taking hold and, we’re confident, will lead to the creation of sustainable shareholder value," Mr. Lane said.
Worldwide net sales and revenues were $3.469 billion for the fourth quarter of 2002 and $13.947 billion for the year, compared with $3.161 billion for the fourth quarter and $13.293 billion in 2001. Net equipment sales were $2.947 billion for the fourth quarter and $11.703 billion for the year, compared with $2.602 billion and $11.077 billion a year ago. The quarter's net–sales increase was primarily due to higher sales of agricultural equipment, mainly overseas but also in the U.S. and Canada, as well as higher sales of commercial and consumer equipment. The sales increase for the year reflected higher overseas sales of agricultural equipment, especially in Europe, the impact of acquisitions net of divestitures and higher sales of commercial and consumer equipment. For the year, sales were down for construction and forestry equipment (excluding acquisitions) and also for agricultural equipment in the U.S. and Canada. Overseas sales rose by 16 percent for the quarter and 19 percent for the year due to higher agricultural–equipment sales mainly in Europe. Without the effect of foreign–exchange rate changes, overseas sales would have been up 13 percent for the quarter and 18 percent for the year.
Commercial & Consumer Equipment
Net sales of the commercial and consumer equipment division were up 20 percent for the quarter and 7 percent for the year. Excluding the impact of acquisitions less divestitures, net sales increased 26 percent and 6 percent in the respective periods. Improved operating results for the seasonally weak quarter were primarily due to higher sales, the absence of losses from Homelite and lower sales–incentive costs. The yearly operating–profit improvement was mainly due to the absence of losses from Homelite, higher sales, lower sales–incentive costs, lower expenses and the receipt of fire–insurance settlements. Partially offsetting these factors for both periods was the compensation to credit. Company–owned and field inventory reductions totaled $204 million for the year.
Market Conditions & Outlook
Based on the market conditions outlined below, net equipment sales for the first quarter of 2003 are currently forecast to be up 20-25 percent from the same period last year, with company–wide net income from zero to $50 million. As announced earlier, the company expects equipment sales for the full year to be up 8 to 10 percent and enterprise net income to be in a range of $500 million to $600 million. This incorporates the favorable impact of approximately $50 million, after tax, from the first–quarter adoption of SFAS 142, eliminating goodwill expense.
Deere's yearly earnings estimate also includes higher pension and post–retirement benefit expense of between $250 million to $300 million pretax, as the company is modifying its assumptions to reflect recent trends in medical inflation, interest rates and equity returns. This compares with an increase in 2002 of approximately $115 million, before special items.
Shipments of John Deere commercial and consumer equipment are projected to be up about 15 percent for the year. Supporting the improved outlook is a recent strengthening in retail activity as well as the expected success of the new 100–series line of John Deere lawn tractors that will be available in the spring. Sales are also expected to benefit from producing more in line with retail demand.
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