- Earnings per share climb 27% on 10% gain in net sales and revenues.
- Results benefit from healthy farm conditions, skillful execution of business
- Full-year profit forecast increased.
MOLINE, Ill., Feb. 13, 2013 /CNW/ - Net income attributable to Deere & Company
(NYSE: DE) was $649.7 million, or $1.65 per share, for the first quarter ended
January 31, compared with $532.9 million, or $1.30 per share, for the same
period last year.
Worldwide net sales and revenues for the first quarter increased 10 percent,
to $7.421 billion, compared with $6.767 billion last year. Net sales of the
equipment operations were $6.793 billion for the quarter compared with $6.119
billion a year ago.
"With our eleventh consecutive quarter of record earnings, John Deere has
started 2013 on a positive note and is setting the stage for another
successful year," said Samuel R. Allen, chairman and chief executive officer.
"These results are further proof of the adept execution of operating and
marketing plans aimed at expanding our global market presence while
maintaining a tight grip on costs and assets," he said. "As a result, Deere
remains well-positioned to earn solid profits in today's fragile global
economy and, longer term, to benefit from major trends that we continue to
believe hold great promise for the company and its customers and investors."
Summary of Operations
Net sales of the worldwide equipment operations rose 11 percent for the
quarter. Sales included price increases of 3 percent and an unfavorable
currency-translation effect of 1 percent. Equipment net sales in the United
States and Canada increased 18 percent for the quarter. Outside the U.S. and
Canada, net sales increased 2 percent for the quarter, including an
unfavorable currency-translation effect of 3 percent.
Deere's equipment operations reported operating profit of $837 million for the
quarter, compared with $698 million last year. Results benefited from higher
shipment volumes and price realization. These factors were partially offset by
increases in production costs, selling, administrative and general expenses,
warranty costs, and research and development expenses. The increased
production costs related primarily to manufacturing-overhead expenses in
support of growth, new products, and engine-emission requirements.
Net income of the company's equipment operations was $525 million for the
quarter, compared with $416 million last year. The same operating factors
mentioned above, along with a lower effective tax rate and increased interest
expense, affected the quarterly results.
Financial services reported net income attributable to Deere & Company of
$132.9 million for the quarter compared with $119.1 million last year. The
improvement was primarily related to growth in the credit portfolio and higher
crop insurance margins, partially offset by increased selling, administrative
and general expenses. In addition, last year's results benefited from revenue
related to wind energy credits.
Company Outlook & Summary
Company equipment sales are projected to be up about 6 percent for fiscal 2013
and up about 4 percent for the second quarter compared with the same periods
of 2012. For the full year, net income attributable to Deere & Company is
anticipated to be approximately $3.3 billion.
Although Deere is looking to achieve strong results in 2013, persistent global
economic and fiscal concerns warrant continued caution. "We're confident our
investment in new products and additional capacity will help Deere fully
capitalize on the world's growing need for food, shelter and infrastructure in
the years ahead," Allen said. "However, the near-term outlook is being
tempered by uncertainties over fiscal, economic and trade issues that are
undermining business confidence and restraining growth."
Equipment Division Performance
Agriculture & Turf. Sales increased 16 percent for the quarter largely due to
higher shipment volumes and price realization, partially offset by the
unfavorable effects of currency translation. Operating profit was $766 million
compared with $574 million for the quarter last year. The improvement was
primarily due to higher shipment volumes and price realization. These factors
were partially offset by increases in selling, administrative and general
expenses, warranty costs, production costs and research and development
Construction & Forestry. Construction and forestry sales decreased 7 percent.
Operating profit for the quarter was $71 million compared with $124 million a
year ago. The reduced operating profit was primarily due to lower shipment
volumes. In addition, higher production costs, an unfavorable product mix, as
well as increases in research and development and selling, administrative and
general expenses were offset by price realization.
Market Conditions & Outlook
Agriculture & Turf. Worldwide sales of agriculture and turf equipment are
forecast to increase by about 6 percent for full-year 2013. Relatively high
commodity prices and strong farm incomes are expected to continue supporting a
favorable level of demand for farm machinery during the year. Deere's sales
are expected to see further benefit from global expansion and a number of
advanced new products.
Industry sales for agricultural machinery in the U.S. and Canada are forecast
to be flat to up 5 percent in relation to last year's healthy levels. Caution
in the U.S. livestock sector is expected to partly offset continued strength
in demand for large equipment such as high-horsepower tractors and combines.
Full-year industry sales in the EU27 are forecast to be down about 5 percent
due to weakness in the overall economy and last year's poor harvest in the
U.K. In South America, industry sales are projected to be up 10 to 15 percent
as a result of strong market conditions in Brazil. Industry sales in the
Commonwealth of Independent States are expected to be down slightly from 2012,
while Asian sales are projected to be slightly higher due to some
strengthening in the Chinese economy.
In the U.S. and Canada, industry sales of turf and utility equipment are
expected to be about flat for 2013, reflecting a continuation of cautious
consumer sentiment. Deere's sales are expected to increase more than the
industry due to the impact of new products.
Construction & Forestry. Deere's worldwide sales of construction and forestry
equipment are forecast to increase by about 3 percent for 2013. The increase
reflects a cautious outlook for U.S. economic growth, higher international
sales of construction equipment, and flat sales in world forestry markets. In
the forestry sector, further weakness in European markets is expected to
offset higher U.S. demand.
Financial Services. Full-year 2013 net income attributable to Deere & Company
for the financial services operations is expected to be approximately $540
million. The forecast improvement is primarily due to expected growth in the
credit portfolio and lower crop insurance claims. These factors are projected
to be partially offset by an increase in the provision for credit losses.
Though higher than in 2012, the provision is anticipated to remain below its
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 $105.0 million
for the first quarter, compared with $93.3 million last year. Results improved
for the quarter primarily due to growth in the credit portfolio, partially
offset by higher selling, administrative and general expenses.
Net receivables and leases financed by JDCC were $26.329 billion and $22.486
billion at January 31, 2013 and 2012, respectively.
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 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
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. Uncertainty
about and actual 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 and tariffs in particular jurisdictions or for the benefit of certain
industries or sectors (including protectionist 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, Final Tier 4 and Stage IIIb non-road
diesel emission requirements), carbon and other greenhouse gas emissions,
noise and the risk 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 actions by other regulatory bodies including
changes in laws and regulations affecting the sectors in which the company
operates. 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; 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 market uncertainty increases and general economic
conditions worsen, 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
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).
First Quarter 2013 Press Release
(in millions of dollars)
Three Months Ended
Net sales and revenues:
Agriculture and turf $ 5,491 $ 4,724 +16
Construction and forestry 1,302 1,395 -7
Total net sales 6,793 6,119 +11
Financial services 527 548 -4
Other revenues 101 100 +1
Total net sales and revenues $ 7,421 $ 6,767 +10
Operating profit *
Agriculture and turf $ 766 $ 574 +33
Construction and forestry 71 124 -43
Financial services 197 175 +13
Total operating profit 1,034 873 +18
Reconciling items ** (95) (74) +28
Income taxes (289) (266) +9
Net income attributable to Deere & Company $ 650 $ 533 +22
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
Ken Golden, Director, Global Public Relations, 309-765-5678
SOURCE: Deere & Company
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