Deere Announces Record Fourth-Quarter Earnings of $807 Million
- Fourth-quarter income rises 17%; earnings per share up 21%.
- Full-year earnings reach record $3.54 billion.
- New products, additional capacity help expand global customer base.
- Forecast calls for income of $3.3 billion in 2014.
MOLINE, Ill., Nov. 20, 2013
MOLINE, Ill., Nov. 20, 2013 /PRNewswire/ -- Net income attributable to Deere &
Company (NYSE: DE) was $806.8 million, or $2.11 per share, for the fourth
quarter ended October 31, compared with $687.6 million, or $1.75 per share,
for the same period last year.
For fiscal 2013, net income attributable to Deere & Company was $3.537
billion, or $9.09 per share, compared with $3.065 billion, or $7.63 per share,
Worldwide net sales and revenues decreased 3 percent, to $9.451 billion, for
the fourth quarter and increased 5 percent, to $37.795 billion, for the full
year. Net sales of the equipment operations were $8.624 billion for the
quarter and $34.998 billion for the year, compared with $9.047 billion and
$33.501 billion for the same periods in 2012.
"With our strong financial results in the fourth quarter, John Deere has
wrapped up another year of impressive achievement," said Samuel R. Allen,
chairman and chief executive officer. Income for the periods was higher than
in any previous fourth quarter or full year, he pointed out. "During the year,
Deere continued with a record number of product introductions and completed
seven new factories, in Brazil, Russia, India and China. These products and
additional capacity are essential to helping the company expand its global
customer base and realize its long-term business objectives.
"Deere's performance is a testament to our ability to execute our business
plans, which stress the rigorous management of costs and assets," Allen
stated. "This has led to an all-time high in profitability, as measured by
operating return on operating assets, and record earnings for the last three
years. In addition, the company has delivered healthy levels of cash flow,
which has been used to fund global growth programs and provide direct benefit
to investors through dividends and share repurchases."
Summary of Operations
Net sales of the worldwide equipment operations decreased 5 percent for the
quarter and increased 4 percent for the full year compared with the same
periods in 2012. Sales included price realization of 4 percent for the quarter
and 3 percent for the year and an unfavorable currency-translation effect of 2
percent for the quarter and 1 percent for the year. Equipment net sales in the
United States and Canada decreased 6 percent for the quarter and increased 5
percent for the year. Outside the U.S. and Canada, net sales decreased 2
percent for the quarter and increased 4 percent for the year, with unfavorable
currency-translation effects of 4 percent and 3 percent for these periods.
Deere's equipment operations reported operating profit of $1.114 billion for
the quarter and $5.058 billion for the full year, compared with $1.051 billion
and $4.397 billion in 2012. The improvement for the quarter was due primarily
to the impact of price realization, partially offset by the unfavorable
effects of foreign-currency exchange, lower shipment volumes and a less
favorable product mix. Full-year results improved largely due to the impact of
price realization and higher shipment volumes. Annual results also were
impacted by unfavorable effects of foreign-currency exchange, increased
production costs, higher selling, administrative and general expenses and
higher warranty costs. Increased production costs were due primarily to higher
manufacturing-overhead expenses in support of growth, new products and
engine-emission requirements, partially offset by lower raw-material costs.
In conjunction with the previously announced agreement to sell a majority
interest in John Deere Landscapes, these operations were written down to
realizable value in the quarter. In addition, both the quarterly and
year-to-date periods were affected by impairment charges for long-lived assets
related to John Deere Water operations.
Net income of the company's equipment operations was $650 million for the
fourth quarter and $2.974 billion for the full year, compared with $576
million and $2.616 billion in 2012. The operating factors mentioned above,
along with a lower effective tax rate, had an impact on the quarter's results.
Increased interest expense and a higher effective tax rate also affected
Financial services reported net income attributable to Deere & Company of
$157.1 million for the quarter and $565.0 million for the year compared with
$121.7 million and $460.3 million in 2012. Results for both periods were aided
by growth in the credit portfolio and higher crop insurance margins, partially
offset by higher selling, administrative and general expenses. Further, the
quarter's results were impacted by less favorable financing spreads, and
full-year 2012 results benefited from revenue related to wind energy credits.
Company Outlook & Summary
Company equipment sales are projected to decrease about 3 percent for fiscal
2014 and be down about 2 percent for the first quarter compared with year-ago
periods. For fiscal 2014, net income attributable to Deere & Company is
anticipated to be about $3.3 billion. The outlook contemplates the sale of 60
percent of John Deere Landscapes operations, as previously announced.
Supported by record 2013 performance, John Deere remains in a prime position
to carry out its wide-ranging growth plans and attract new customers
throughout the world, Allen said. "Thanks in large measure to the commitment
of our employees, dealers and suppliers, John Deere's plans for helping meet
the world's need for food, shelter and infrastructure are firmly on track," he
said. "We remain confident in the company's direction and its ability to serve
a population growing in both size and prosperity in the years ahead. In spite
of lingering global economic concerns, we believe these developments continue
to hold great promise and should provide significant benefits to our investors
and other stakeholders well into the future."
Equipment Division Performance
Agriculture & Turf. Sales decreased 4 percent for the quarter primarily due to
lower shipment volumes and the unfavorable effects of currency translation,
partially offset by price realization. Sales increased 7 percent for the full
year largely due to higher shipment volumes and price realization, partially
offset by the unfavorable effects of currency translation.
Operating profit was $996 million for the quarter and $4.680 billion for the
year, compared with $931 million and $3.921 billion, respectively, in 2012.
The improvement for the quarter was driven primarily by price realization,
partially offset by the unfavorable effects of foreign-currency exchange, a
less favorable product mix and lower shipment volumes. Full-year results
improved due primarily to the impact of price realization and higher shipment
volumes. These factors were partially offset by the unfavorable effects of
foreign-currency exchange, increased production costs, higher selling,
administrative and general expenses, and higher warranty costs. Both periods
also were affected by a charge to write down John Deere Landscapes operations
to realizable value and an impairment charge for long-lived assets related to
John Deere Water.
Construction & Forestry. Construction and forestry sales decreased 8 percent
for the quarter and the full year mainly as a result of lower shipment
volumes, partially offset by price realization. Operating profit was $118
million for the quarter and $378 million for the year, compared with $120
million and $476 million in 2012. Results were slightly lower for the quarter
primarily because of reduced shipment volumes and higher selling,
administrative and general expenses, mostly offset by price realization and
lower production costs. Full-year results decreased mainly due to lower
shipment volumes, a less favorable product mix, increases in production costs,
and higher selling, administrative and general expenses. These factors were
partially offset by price realization.
Market Conditions & Outlook
Agriculture & Turf. Deere's worldwide sales of agriculture and turf equipment
are forecast to decrease by about 6 percent for full-year 2014. The outlook
contemplates the sale of a majority interest in the John Deere Landscapes
operations. Although commodity prices and farm incomes are expected to remain
at healthy levels in 2014 by historical standards, they are forecast to be
lower than in 2013. The company believes the decline will have a dampening
effect on demand, primarily for large farm equipment.
Industry sales for agricultural machinery in the U.S. and Canada are forecast
to be down 5 to 10 percent for the year, with the decline mainly reflecting
lower sales of large equipment such as high-horsepower tractors and combines.
Full-year industry sales in the EU28 are forecast to be down about 5 percent
due to lower commodity prices and farm incomes. In South America, industry
sales of tractors and combines are projected to be down 5 to 10 percent from
strong 2013 levels. Industry sales in the Commonwealth of Independent States
are expected to be down slightly for the year, while 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 up about 5 percent for 2014, reflecting improved market
Construction & Forestry. Deere's worldwide sales of construction and forestry
equipment are forecast to increase by about 10 percent for 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 higher sales
in European markets.
Financial Services. Full-year 2014 net income attributable to Deere & Company
for the financial services operations is expected to be approximately $600
million. The outlook reflects improvement primarily due to continued growth in
the credit portfolio, partially offset by a projected increase in the
provision for credit losses from the low level in 2013.
JohnDeere Capital Corporation
The following is disclosed on behalf of the company's financial services
subsidiary, JohnDeere 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 $132.9 million
for the fourth quarter and $468.5 million for full-year 2013, compared with
$112.6 million and $382.7 million for the respective periods in 2012. Results
improved for both periods due primarily to growth in the credit portfolio,
partially offset by higher selling, administrative and general expenses. Less
favorable financing spreads also impacted results for the quarter.
Net receivables and leases financed by JDCC were $30.594 billion and $26.509
billion at October 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 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
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/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 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
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).
Fourth Quarter 2013 Press Release
(in millions of dollars)
Three Months Ended October 31 Twelve Months Ended October
2013 2012 Change 2013 2012 Change
Net sales and
Agriculture and $ 7,102 $ 7,393 -4 $ 29,132 $ 27,123 +7
Construction 1,522 1,654 -8 5,866 6,378 -8
Total 8,624 9,047 -5 34,998 33,501 +4
Financial 699 633 +10 2,349 2,235 +5
Other revenues 128 112 +14 448 421 +6
Total net $ 9,451 $ 9,792 -3 $ 37,795 $ 36,157 +5
sales and revenues
Agriculture and $ 996 $ 931 +7 $ 4,680 $ 3,921 +19
Construction 118 120 -2 378 476 -21
Financial 241 191 +26 870 712 +22
Total 1,355 1,242 +9 5,928 5,109 +16
Reconciling items (111) (129) -14 (445) (385) +16
Income taxes (437) (425) +3 (1,946) (1,659) +17
$ 807 $ 688 +17 $ 3,537 $ 3,065 +15
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
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
Contact: Ken Golden, Director, Global Public Relations, 309-765-5678
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