MOLINE, Ill., May 14, 2014 /PRNewswire/ -- 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