- Earnings per share decline 4% to $2.65; net sales and revenues down 9%.
- Solid execution and rigorous cost management aid
performance.
- Income forecast for year remains at $3.3 billion.
MOLINE,
Ill., May 14, 2014 /CNW/ - Net income
attributable to Deere & Company (NYSE: DE) was $980.7 million, or
$2.65
per share, for the second quarter ended April 30, compared
with $1.084
billion, or $2.76 per share, for the same period last
year.
For the first six months of 2014, net income attributable to
Deere & Company was $1.662 billion, or $4.46 per share,
compared with $1.734
billion, or $4.41 per share, last year.
Worldwide net sales and revenues decreased 9 percent, to
$9.948
billion, for the second quarter and were down 4
percent, to $17.602
billion, for six months. Net sales of the equipment
operations were $9.246 billion for the quarter and
$16.195
billion for six months, compared with $10.265 billion and
$17.058
billion for the same periods last year.
"John Deere is on its way to another year of solid financial and
operating performance," said Samuel R. Allen, chairman and chief
executive officer. "Our second-quarter earnings showed further
proof of the adept execution of our operating plans. We kept costs
and assets well under control while successfully managing major
new-product transitions associated with more stringent emissions
standards. In addition, our construction and forestry and financial
services operations delivered improved results, reflecting the
power of our broad-based business lineup."
Summary of Operations
Net sales of the worldwide equipment operations declined 10
percent for the quarter and 5 percent for six months compared with
the same periods a year ago. Sales included price realization of 2
percent and an unfavorable currency-translation effect of 1 percent
for the quarter and six months. Equipment net sales in the United
States and Canada decreased 12 percent for the
quarter and 6 percent year to date. Outside the U.S. and
Canada, net sales were down 6 percent
for the quarter and 3 percent for six months, including unfavorable
currency-translation effects of 2 percent for both periods.
Deere's equipment operations reported operating profit of
$1.361
billion for the quarter and $2.252 billion for
six months, compared with $1.663 billion and $2.500 billion last
year. The decline for both periods was due primarily to the impact
of lower shipment volumes, the unfavorable effects of
foreign-currency exchange, and a less favorable product mix,
partially offset by price realization.
Net income of the company's equipment operations was
$838
million for the second quarter and $1.381 billion for
the first six months, compared with $953 million and
$1.478
billion in 2013. In addition to the operating factors
mentioned above, a lower effective tax rate benefited both
quarterly and six-month results.
Financial services reported net income attributable to Deere
& Company of $147.7 million for the quarter and
$289.9
million for six months compared with $125.0 million and
$257.9
million last year. The improvement for the quarter
was due to growth in the credit portfolio, partially offset by
higher selling, administrative and general expenses. Six-month
results improved due to growth in the credit portfolio and a more
favorable effective tax rate, partially offset by lower crop
insurance margins and higher selling, administrative and general
expenses.
Company Outlook & Summary
Company equipment sales are projected to decrease about 4
percent for fiscal 2014 and for the third quarter compared with the
year-ago periods. Included is an unfavorable currency-translation
effect of about 1 percent for the year. For the fiscal year, net
income attributable to Deere & Company is anticipated to be
about $3.3
billion.
"John Deere expects to achieve near-record earnings for the full
year and the company is well-positioned to deliver solid financial
results throughout the business cycle," Allen said. "We're
confident our extensive investments in new products and markets,
coupled with a tight rein on costs and assets, will keep the
company on a sound financial footing and help sustain our growth
plans." These plans are essential to meeting the world's growing
need for food, shelter and infrastructure, he added, and they
should lead to significant benefits for the company's investors and
customers in the years ahead.
Equipment Division Performance
Agriculture & Turf. Sales fell 12 percent for the
quarter and 7 percent for six months due largely to lower shipment
volumes, the previously announced sale of John Deere Landscapes and
the unfavorable effects of currency translation, partially offset
by price realization.
Operating profit was $1.229 billion for the quarter and
$2.026
billion year to date, compared with $1.582 billion and
$2.347
billion, respectively, last year. The deterioration
for both periods was driven primarily by the impact of lower
shipment volumes, the unfavorable effects of foreign-currency
exchange, and a less favorable product mix, partially offset by
price realization.
Construction & Forestry. Construction and forestry
sales increased 2 percent for the quarter and 3 percent for six
months mainly as a result of higher shipment volumes. Operating
profit was $132
million for the quarter and $226 million for
six months, compared with $81 million and $153 million last
year. Operating profit improved for both periods primarily due to
higher shipment volumes, lower production costs and lower selling,
administrative and general expenses, partially offset by higher
sales incentive costs. Six-month results also benefited from lower
research and development expenses.
Market Conditions & Outlook
Agriculture & Turf. Deere's worldwide sales of
agriculture and turf equipment are forecast to decrease by about 7
percent for fiscal-year 2014, including a negative
currency-translation effect of about 1 percent.
Although the agricultural economy remains in a relatively
healthy condition, farm income is forecast to be lower than last
year. The decline is putting pressure on demand for farm equipment,
especially for larger models. At the same time, strength in the
U.S. livestock sector is providing support to sales of mid- and
smaller-size tractors. Based on these factors, industry sales for
agricultural machinery in the U.S. and Canada are
forecast to be down 5 to 10 percent for the year.
Full-year industry sales in the EU28 are forecast to be down
about 5 percent due to lower crop prices and farm incomes. In
South
America, industry sales of tractors and combines are
projected to be down about 10 percent from strong 2013 levels.
Market conditions in the Commonwealth of Independent States have
weakened and industry sales there are expected to be down
significantly for the year. Asian sales are projected to be up
slightly.
In the U.S. and Canada, industry sales of turf and
utility equipment are expected to be flat to up 5 percent for 2014,
helped by improved market conditions.
Construction & Forestry. Deere's worldwide sales of
construction and forestry equipment are forecast to increase by
about 10 percent for full-year 2014. The gain reflects further
economic recovery and higher housing starts in the U.S. as well as
sales increases outside the U.S. and Canada.
Global forestry sales are expected to be up for the year due to
general economic growth and improved sales in European markets.
Financial Services. Fiscal-year 2014 net income
attributable to Deere & Company for the financial services
operations is expected to be approximately $600 million. The
outlook reflects improvement over last year due primarily to
expected growth in the credit portfolio and a more favorable tax
rate. These factors are projected to be partially offset by higher
selling, administrative and general expenses, lower crop insurance
margins and an increase in the provision for credit losses from the
low level in 2013.
John Deere Capital Corporation
The following is disclosed on behalf of the company's financial
services subsidiary, John Deere Capital Corporation (JDCC), in
connection with the disclosure requirements applicable to its
periodic issuance of debt securities in the public market.
Net income attributable to John Deere Capital Corporation was
$124.3
million for the second quarter and $260.8 million year
to date, compared with $105.9 million and $210.9 million for
the respective periods last year. Results improved for both periods
primarily due to growth in the credit portfolio, partially offset
by higher selling, administrative and general expenses. In
addition, six-month results benefited from a more favorable
effective tax rate.
Net receivables and leases financed by JDCC were $32.231 billion at
April 30,
2014, compared with $28.721 billion
last year.
Safe Harbor Statement
Safe Harbor Statement under the Private Securities Litigation
Reform Act of 1995: Statements under "Company Outlook &
Summary," "Market Conditions & Outlook," and other
forward-looking statements herein that relate to future events,
expectations, trends and operating periods involve certain factors
that are subject to change, and important risks and uncertainties
that could cause actual results to differ materially. Some of these
risks and uncertainties could affect particular lines of business,
while others could affect all of the company's businesses.
The company's agricultural equipment business is subject to a
number of uncertainties including the many interrelated factors
that affect farmers' confidence. These factors include worldwide
economic conditions, demand for agricultural products, world grain
stocks, weather conditions (including its effects on timely
planting and harvesting), soil conditions (including low subsoil
moisture from recent drought conditions), harvest yields, prices
for commodities and livestock, crop and livestock production
expenses, availability of transport for crops, the growth and
sustainability of non-food uses for some crops (including ethanol
and biodiesel production), real estate values, available acreage
for farming, the land ownership policies of various governments,
changes in government farm programs and policies (including those
in Argentina, Brazil,
China, the European Union, India,
Russia and the U.S.), international
reaction to such programs, changes in and effects of crop insurance
programs, global trade agreements, animal diseases and their
effects on poultry, beef and pork consumption and prices, crop
pests and diseases, and the level of farm product exports
(including concerns about genetically modified organisms).
Factors affecting the outlook for the company's turf and utility
equipment include general economic conditions, consumer confidence,
weather conditions, customer profitability, consumer borrowing
patterns, consumer purchasing preferences, housing starts,
infrastructure investment, spending by municipalities and golf
courses, and consumable input costs.
General economic conditions, consumer spending patterns, real
estate and housing prices, the number of housing starts and
interest rates are especially important to sales of the company's
construction and forestry equipment. The levels of public and
non-residential construction also impact the results of the
company's construction and forestry segment. Prices for pulp,
paper, lumber and structural panels are important to sales of
forestry equipment.
All of the company's businesses and its reported results are
affected by general economic conditions in the global markets in
which the company operates, especially material changes in economic
activity in these markets; customer confidence in general economic
conditions; foreign currency exchange rates and their volatility,
especially fluctuations in the value of the U.S. dollar; interest
rates; and inflation and deflation rates. General economic
conditions can affect demand for the company's equipment as well.
Government spending and taxing could adversely affect the economy,
employment, consumer and corporate spending, and company
results.
Customer and company operations and results could be affected by
changes in weather patterns (including the effects of drought
conditions in parts of the U.S. and dryer than normal conditions in
certain other markets); the political and social stability of the
global markets in which the company operates; the effects of, or
response to, terrorism and security threats; wars and other
conflicts and the threat thereof; and the spread of major
epidemics.
Significant changes in market liquidity conditions and any
failure to comply with financial covenants in credit agreements
could impact access to funding and funding costs, which could
reduce the company's earnings and cash flows. Financial market
conditions could also negatively impact customer access to capital
for purchases of the company's products and customer confidence and
purchase decisions; borrowing and repayment practices; and the
number and size of customer loan delinquencies and defaults. A debt
crisis, in Europe or elsewhere, could negatively
impact currencies, global financial markets, social and political
stability, funding sources and costs, asset and obligation values,
customers, suppliers, and company operations and results. State
debt crises also could negatively impact customers, suppliers,
demand for equipment, and company operations and results. The
company's investment management activities could be impaired by
changes in the equity and bond markets, which would negatively
affect earnings.
Additional factors that could materially affect the company's
operations, access to capital, expenses and results include changes
in and the impact of governmental trade, banking, monetary and
fiscal policies, including financial regulatory reform and its
effects on the consumer finance industry, derivatives, funding
costs and other areas, and governmental programs, policies, tariffs
and sanctions in particular jurisdictions or for the benefit of
certain industries or sectors (including protectionist, economic,
punitive and expropriation policies and trade and licensing
restrictions that could disrupt international commerce); actions by
the U.S. Federal Reserve Board and other central banks; actions by
the U.S. Securities and Exchange Commission (SEC), the U.S.
Commodity Futures Trading Commission and other financial
regulators; actions by environmental, health and safety regulatory
agencies, including those related to engine emissions (in
particular Interim Tier 4/Stage IIIb and Final Tier 4/Stage IV
non-road diesel emission requirements in the U.S. and European
Union), carbon and other greenhouse gas emissions, noise and the
effects of climate change; changes in labor regulations; changes to
accounting standards; changes in tax rates, estimates, and
regulations and company actions related thereto; compliance with
U.S. and foreign laws when expanding to new markets and otherwise;
and actions by other regulatory bodies including changes in laws
and regulations affecting the sectors in which the company
operates. Trade, financial and other sanctions imposed by the U.S.,
the European Union, Russia and other countries could
negatively impact company assets, operations, sales, forecasts and
results. Customer and company operations and results also could be
affected by changes to GPS radio frequency bands or their permitted
uses.
Other factors that could materially affect results include
production, design and technological innovations and difficulties,
including capacity and supply constraints and prices; the
availability and prices of strategically sourced materials,
components and whole goods; delays or disruptions in the company's
supply chain or the loss of liquidity by suppliers; the failure of
suppliers to comply with laws, regulations and company policy
pertaining to employment, human rights, health, safety, the
environment and other ethical business practices; events that
damage the company's reputation or brand; start-up of new plants
and new products; the success of new product initiatives and
customer acceptance of new products; changes in customer product
preferences and sales mix whether as a result of changes in
equipment design to meet government regulations or for other
reasons; gaps or limitations in rural broadband coverage, capacity
and speed needed to support technology solutions; oil and energy
prices and supplies; the availability and cost of freight; actions
of competitors in the various industries in which the company
competes, particularly price discounting; dealer practices
especially as to levels of new and used field inventories; labor
relations; acquisitions and divestitures of businesses, the
integration of new businesses; the implementation of organizational
changes; difficulties related to the conversion and implementation
of enterprise resource planning systems that disrupt business,
negatively impact supply or distribution relationships or create
higher than expected costs; security breaches and other disruptions
to the company's information technology infrastructure; changes in
company declared dividends and common stock issuances and
repurchases.
Company results are also affected by changes in the level and
funding of employee retirement benefits, changes in market values
of investment assets, the level of interest and discount rates, and
compensation, retirement and mortality rates which impact
retirement benefit costs, and significant changes in health care
costs including those which may result from governmental
action.
The liquidity and ongoing profitability of John Deere Capital
Corporation and other credit subsidiaries depend largely on timely
access to capital to meet future cash flow requirements and fund
operations and the costs associated with engaging in diversified
funding activities and to fund purchases of the company's products.
If general economic conditions worsen or capital markets become
volatile, funding could be unavailable or insufficient.
Additionally, customer confidence levels may result in declines in
credit applications and increases in delinquencies and default
rates, which could materially impact write-offs and provisions for
credit losses. The failure of reinsurers of the company's insurance
business also could materially affect results.
The company's outlook is based upon assumptions relating to the
factors described above, which are sometimes based upon estimates
and data prepared by government agencies. Such estimates and data
are often revised. The company, except as required by law,
undertakes no obligation to update or revise its outlook, whether
as a result of new developments or otherwise. Further information
concerning the company and its businesses, including factors that
potentially could materially affect the company's financial
results, is included in the company's other filings with the SEC
(including, but not limited to, the factors discussed in Item 1A.
Risk Factors of the company's most recent annual report on Form
10-K and quarterly reports on Form 10-Q).
Second Quarter 2014
Press Release
|
|
(in millions of
dollars)
|
|
Unaudited
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
April 30
|
|
Six Months Ended
April 30
|
|
|
2014
|
|
2013
|
|
%
Change
|
|
2014
|
|
2013
|
|
%
Change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales and
revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
Agriculture and
turf
|
|
$
|
7,646
|
|
$
|
8,691
|
|
-12
|
|
$
|
13,242
|
|
$
|
14,182
|
|
-7
|
Construction and
forestry
|
|
1,600
|
|
1,574
|
|
+2
|
|
2,953
|
|
2,876
|
|
+3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net
sales
|
|
9,246
|
|
10,265
|
|
-10
|
|
16,195
|
|
17,058
|
|
-5
|
Financial
services
|
|
572
|
|
536
|
|
+7
|
|
1,159
|
|
1,063
|
|
+9
|
Other
revenues
|
|
130
|
|
113
|
|
+15
|
|
248
|
|
214
|
|
+16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net sales and
revenues
|
|
$
|
9,948
|
|
$
|
10,914
|
|
-9
|
|
$
|
17,602
|
|
$
|
18,335
|
|
-4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit:
*
|
|
|
|
|
|
|
|
|
|
|
|
|
Agriculture and
turf
|
|
$
|
1,229
|
|
$
|
1,582
|
|
-22
|
|
$
|
2,026
|
|
$
|
2,347
|
|
-14
|
Construction and
forestry
|
|
132
|
|
81
|
|
+63
|
|
226
|
|
153
|
|
+48
|
Financial
services
|
|
229
|
|
198
|
|
+16
|
|
411
|
|
395
|
|
+4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating
profit
|
|
1,590
|
|
1,861
|
|
-15
|
|
2,663
|
|
2,895
|
|
-8
|
Reconciling items
**
|
|
(130)
|
|
(111)
|
|
+17
|
|
(241)
|
|
(206)
|
|
+17
|
Income
taxes
|
|
(479)
|
|
(666)
|
|
-28
|
|
(760)
|
|
(955)
|
|
-20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
attributable to
Deere &
Company
|
|
$
|
981
|
|
$
|
1,084
|
|
-10
|
|
$
|
1,662
|
|
$
|
1,734
|
|
-4
|
|
|
|
|
*
|
Operating profit is
income from continuing operations before corporate expenses,
certain external interest expense, certain foreign exchange gains
and losses and income taxes. Operating profit of the financial
services segment includes the effect of interest expense and
foreign exchange gains or losses.
|
|
|
**
|
Reconciling items are
primarily corporate expenses, certain external interest expense,
certain foreign exchange gains and losses and net income
attributable to noncontrolling interests.
|
SOURCE Deere & Company