- Slowdown in global farm economy leads to lower sales and
earnings.
- Well-rounded business lineup supports performance.
- Results aided by solid execution and cost management.
- Full-year earnings forecast increased to $1.9 billion.
MOLINE, Ill., May 22, 2015 /PRNewswire/ -- Net income
attributable to Deere & Company (NYSE: DE) was $690.5 million, or $2.03 per share, for the second quarter ended
April 30, compared with $980.7 million, or $2.65 per share, for the same period last
year.
For the first six months of the year, net income attributable to
Deere & Company was $1.077
billion, or $3.14 per share,
compared with $1.662 billion, or
$4.46 per share, last year.
Worldwide net sales and revenues decreased 18 percent, to
$8.171 billion, for the second
quarter and decreased 17 percent, to $14.554
billion, for six months. Net sales of the equipment
operations were $7.399 billion for
the quarter and $13.004 billion for
six months, compared with $9.246
billion and $16.195 billion
for the periods last year.
"John Deere's second-quarter results were noteworthy in light of
the weak conditions that continue to affect the global agricultural
sector," said Samuel R. Allen,
chairman and chief executive officer. "Our performance reflected
the adept execution of our operating plans and contributions of a
well-rounded business lineup. Deere's construction and forestry and
financial-services divisions had higher results for the quarter,
and our agriculture and turf operations remained solidly profitable
despite lower demand for large models of farm machinery. We also
saw benefits from our success developing a more responsive cost and
asset structure, a fact that gives our performance a greater degree
of resilience."
Summary of Operations
Net sales of the worldwide
equipment operations declined 20 percent for the quarter and six
months compared with the same periods a year ago. Sales included
price realization of 2 percent for both periods and an unfavorable
currency-translation effect of 5 percent for the quarter and 4
percent for six months. Equipment net sales in the United States and Canada decreased 14 percent for the quarter
and year to date. Outside the U.S. and Canada, net sales decreased 28 percent for the
quarter and six months, with unfavorable currency-translation
effects of 10 percent and 8 percent for the periods.
Deere's equipment operations reported operating profit of
$828 million for the quarter and
$1.242 billion for six months,
compared with $1.361 billion and
$2.252 billion last year. The
declines for both periods were due primarily to lower shipment
volumes, the impact of a less favorable product mix and the
unfavorable effects of foreign-currency exchange, partially offset
by price realization and lower selling, administrative and general
expenses.
Net income of the company's equipment operations was
$524 million for the second quarter
and $764 million for the first six
months, compared with $838 million
and $1.381 billion in 2014. 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 $169.8 million for
the quarter and $326.6 million for
six months compared with $147.7
million and $289.9 million
last year. The quarter's improvement was primarily due to a gain on
the previously announced sale of the crop insurance business,
partially offset by less favorable financing spreads. Benefiting
year-to-date results was the crop insurance divestiture and higher
crop insurance margins prior to the sale, as well as growth in the
credit portfolio. These factors were partially offset by less
favorable financing spreads. Last year's six-month results
benefited from a more favorable effective tax rate.
Company Outlook & Summary
Company equipment sales
are projected to decrease about 19 percent for fiscal 2015 and to
be about 17 percent lower for the third quarter compared with
year-ago periods. Included in the forecast is a negative
foreign-currency translation effect of about 4 percent for the full
year and 6 percent for the third quarter. For fiscal
2015, net income attributable to Deere & Company is anticipated
to be about $1.9 billion.
"John Deere expects to be solidly profitable in 2015, with the
year ranking among our stronger ones in sales and earnings despite
the pullback in the farm sector," Allen said. "Such an achievement
illustrates our success establishing a wider range of revenue
sources and a more durable business model. All in all, we remain
confident in the company's present direction and in its ability to
meet customer needs for advanced machinery and innovative services
in the years ahead."
Equipment Division Performance
Agriculture &
Turf. Sales fell 25 percent for the quarter and 26 percent for
six months due largely to lower shipment volumes and the
unfavorable effects of currency translation. These factors were
partially offset by price realization.
Operating profit was $639 million
for the quarter and $907 million year
to date, compared with $1.229 billion
and $2.026 billion, respectively,
last year. Lower results for both periods were driven primarily by
lower shipment volumes and a less favorable sales mix, partially
offset by price realization and lower selling, administrative and
general expenses. Additionally, results for the quarter were
impacted by the unfavorable effects of foreign-currency
exchange.
Construction & Forestry. Construction and forestry
sales increased 2 percent for the quarter and 7 percent for six
months mainly as a result of higher shipment volumes and price
realization.
Operating profit was $189 million
for the quarter and $335 million for
six months, compared with $132
million and $226 million for
the corresponding periods last year. Operating profit improved for
the quarter mainly due to price realization and lower selling,
administrative and general expenses, partially offset by the
unfavorable effects of foreign- currency exchange. Six-month
results were higher primarily due to higher shipment volumes and
price realization, partially offset by unfavorable foreign-currency
exchange effects.
Market Conditions & Outlook
Agriculture &
Turf. Deere's worldwide sales of agriculture and turf equipment
are forecast to decrease by about 24 percent for fiscal-year 2015,
including a negative currency-translation effect of about 5
percent.
Lower commodity prices and falling farm incomes are putting
pressure on demand for agricultural machinery, especially for
larger models. Conditions are more positive in the U.S. livestock
sector, supporting the sale of smaller sizes of equipment. Based on
these factors, industry sales for agricultural equipment in the
U.S. and Canada are forecast to be
down about 25 percent for 2015.
Full-year 2015 industry sales in the EU28 are forecast to be
down about 10 percent, with the decline attributable to lower crop
prices and farm incomes as well as pressure on the dairy sector. In
South America, industry sales of
tractors and combines are projected to be down 15 to 20 percent
mainly as a result of economic uncertainty in Brazil and higher interest rates on
government-sponsored financing. Industry sales in the Commonwealth
of Independent States are expected to be down significantly due to
economic pressures and tight credit conditions in the region. Asian
sales are projected to be down modestly, with most of the decline
occurring in China and
India.
Industry sales of turf and utility equipment in the U.S. and
Canada are expected to be flat to
up 5 percent for 2015, benefiting from general economic growth.
Construction & Forestry. Deere's worldwide sales of
construction and forestry equipment are forecast to increase by
about 2 percent for 2015, including a negative currency-translation
effect of about 3 percent.
The sales improvement reflects economic growth and higher
housing starts in the U.S. offset in part by weakening conditions
in the energy sector and energy-producing regions as well as lower
sales outside the U.S. and Canada.
Global forestry sales are expected to hold steady with the
attractive levels of 2014, as gains in the U.S. and Europe are offset by declines elsewhere.
Financial Services. Fiscal-year 2015 net income
attributable to Deere & Company for the financial services
operations is expected to be approximately $630 million. The outlook reflects an increase
from last year primarily due to the gain on the sale of the crop
insurance business and growth in the credit portfolio, partially
offset by less favorable financing spreads, an expected increase in
the provision for credit losses from 2014's low level, and a less
favorable tax rate.
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
$115.9 million for the second quarter
and $249.5 million year to date,
compared with $124.3 million and
$260.8 million for the respective
periods last year. The decline for the quarter was primarily due to
less favorable financing spreads and a higher provision for credit
losses, partially offset by lower selling, administrative and
general expenses. The decline in year-to-date results is primarily
due to less favorable financing spreads and a higher provision for
credit losses, partially offset by growth in the credit portfolio
and lower selling, administrative and general expenses. Last year's
year-to-date results also benefited from a favorable effective tax
rate.
Net receivables and leases financed by JDCC were $32.877 billion at April
30, 2015, compared with $32.231
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 demand
for agricultural products, world grain stocks, weather conditions
(including its effects on timely planting and harvesting), soil
conditions (including low subsoil moisture), 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 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.
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 and
industries in which the company operates, especially material
changes in economic activity in these markets and industries;
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. 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 and
drier than normal conditions in certain 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
response thereto; natural disasters; 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, demand for equipment, and company operations
and results. The company's investment management activities
could be impaired by changes in the equity, bond and other
financial 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, 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; disruptions of
infrastructures that support communications, operations or
distribution; 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;
significant investigations, claims, lawsuits or other legal
proceedings; 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, supplies and volatility; 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 and contracts;
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; and 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 in order to meet future cash flow requirements,
to fund operations and costs associated with engaging in
diversified funding activities, and to fund purchases of the
company's products. If general economic conditions
deteriorate 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 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 2015
Press Release
(in millions of dollars)
Unaudited
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
April 30
|
|
|
Six Months Ended
April 30
|
|
2015
|
|
2014
|
|
%
Change
|
|
2015
|
|
2014
|
|
%
Change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales and
revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agriculture and turf
|
$
|
5,766
|
|
|
$
|
7,646
|
|
|
-25
|
|
$
|
9,847
|
|
|
$
|
13,242
|
|
|
-26
|
Construction and
forestry
|
1,633
|
|
|
1,600
|
|
|
+2
|
|
3,157
|
|
|
2,953
|
|
|
+7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
net sales
|
7,399
|
|
|
9,246
|
|
|
-20
|
|
13,004
|
|
|
16,195
|
|
|
-20
|
Financial services
|
653
|
|
|
572
|
|
|
+14
|
|
1,301
|
|
|
1,159
|
|
|
+12
|
Other revenues
|
119
|
|
|
130
|
|
|
-8
|
|
249
|
|
|
248
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net sales and
revenues
|
$
|
8,171
|
|
|
$
|
9,948
|
|
|
-18
|
|
$
|
14,554
|
|
|
$
|
17,602
|
|
|
-17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit:
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agriculture and turf
|
$
|
639
|
|
|
$
|
1,229
|
|
|
-48
|
|
$
|
907
|
|
|
$
|
2,026
|
|
|
-55
|
Construction and
forestry
|
189
|
|
|
132
|
|
|
+43
|
|
335
|
|
|
226
|
|
|
+48
|
Financial services
|
265
|
|
|
229
|
|
|
+16
|
|
498
|
|
|
411
|
|
|
+21
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating
profit
|
1,093
|
|
|
1,590
|
|
|
-31
|
|
1,740
|
|
|
2,663
|
|
|
-35
|
Reconciling items
**
|
(79)
|
|
|
(130)
|
|
|
-39
|
|
(168)
|
|
|
(241)
|
|
|
-30
|
Income
taxes
|
(324)
|
|
|
(479)
|
|
|
-32
|
|
(495)
|
|
|
(760)
|
|
|
-35
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable
to Deere & Company
|
$
|
690
|
|
|
$
|
981
|
|
|
-30
|
|
$
|
1,077
|
|
|
$
|
1,662
|
|
|
-35
|
|
|
*
|
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.
|
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/deere-announces-second-quarter-earnings-of-690-million-300087634.html
SOURCE Deere & Company