May 16, 2012, Moline, Ill., /CNW/ - Net income attributable to Deere & Company (NYSE: DE) was $1.056 billion, or $2.61 per share, for the second quarter ended April 30, compared with $904.3 million, or $2.12 per share, for the same period last year.
For the first six months of the year, net income attributable to Deere & Company was $1.589 billion, or $3.91 per share, compared with $1.418 billion, or $3.32 per share, last year.
Worldwide net sales and revenues increased 12 percent, to $10.009 billion, for the second quarter and rose 12 percent to $16.775 billion for six months. Net sales of the equipment operations were $9.405 billion for the quarter and $15.524 billion for six months, compared with $8.328 billion and $13.841 billion for the same periods last year.
"John Deere is well on its way to a year
of outstanding performance after reporting an eighth consecutive quarter
of record earnings," said Samuel R. Allen, chairman and chief executive
officer. "Our results are a reflection of positive conditions in the
global farm economy, which is continuing to show impressive strength and
endurance. Deere is gaining new customers throughout the world, who are
responding with great enthusiasm to our innovative lines of equipment."
At the same time, Allen noted, the company is successfully managing
major new-product launches featuring advanced engine-emission
technology, while significantly expanding its global market presence.
"Skillful execution of our operating plans is helping Deere capitalize
on today's strong farm economy and meet the world's growing need for
productive machinery," he said.
Summary of Operations
Net sales of the worldwide equipment operations increased 13 percent for
the quarter and 12 percent for six months compared with the same
periods a year ago. Sales included price realization of 5 percent for
the quarter and 4 percent year to date and an unfavorable
currency-translation effect of 2 percent for the quarter and 1 percent
for six months. Equipment net sales in the United States and Canada increased 18 percent for the quarter and 13 percent year to date. Outside the U.S. and Canada,
net sales increased 6 percent for the quarter and 12 percent for six
months, with unfavorable currency-translation effects of 4 percent and 3
percent for these periods.
Deere's equipment operations reported operating profit of $1.522 billion for the quarter and $2.220 billion for six months, compared with $1.268 billion and $1.914 billion
last year. The improvement for both periods was primarily due to the
impact of price realization and higher shipment volumes. These factors
were partially offset by higher production costs related to new products
and engine-emission requirements, as well as increased raw-material
costs and research and development expenses.
Financial services reported net income attributable to Deere & Company of $109.2 million for the quarter and $228.3 million for six months compared with $105.1 million and $223.3 million
last year. Results were higher for the quarter primarily due to growth
in the credit portfolio, partially offset by increased selling,
administrative and general expenses. Six-month results benefited from
growth in the credit portfolio, revenue from wind energy credits and a
lower provision for credit losses. These factors were partially offset
by increased selling, administrative and general expenses, higher crop
insurance claims and narrower financing spreads.
Company Outlook & Summary
Company equipment sales are projected to increase by about 15 percent
for fiscal 2012 and by about 25 percent for the third quarter compared
with the same periods a year ago. Included is an unfavorable
currency-translation impact of about 3 percent for the year and 4
percent for the third quarter. For the full year, net income
attributable to Deere & Company is anticipated to be about $3.350 billion.
According to Allen, promising fundamentals are lending strong support to
the company's plans for increased sales and profitability. "Our
extensive investments in new products and additional global capacity are
moving ahead at an accelerated rate," he said, pointing out there are
more than a dozen major projects under way throughout the world,
including seven new factories. "These investments are essential to the
success of our longer-term growth objectives, which we believe are
firmly on track. They also put Deere in a sound position to respond to a
rising global need for food, shelter, and infrastructure in the years
ahead. In our view, these powerful trends have considerable staying
power and should prove highly rewarding to our customers and investors."
Equipment Division Performance
Agriculture & Turf. Sales increased 11 percent for the
quarter and 10 percent for six months largely due to higher shipment
volumes and price realization, partially offset by the unfavorable
effects of currency translation.
Operating profit was $1.403 billion for the quarter and $1.977 billion year to date, compared with $1.163 billion and $1.720 billion,
respectively, last year. The improvement in both periods was primarily
driven by the impact of higher shipment volumes and price realization.
These factors were partially offset by increased production costs
related to new products and engine-emission requirements, as well as
higher raw-material costs and research and development expenses.
Construction & Forestry. Construction and forestry sales
increased 26 percent for the quarter and 24 percent for six months
mainly due to higher shipment volumes and price realization. Operating
profit was $119 million for the quarter and $243 million for six months, compared with $105 million and $194 million
last year. Results improved in both periods primarily due to price
realization and higher shipment volumes, partially offset by increased
raw-material costs and an unfavorable product mix. Also affecting the
performance of both periods were higher research and development and
selling, administrative and general expenses, as well as increased costs
related to engine emissions requirements.
Market Conditions & Outlook
Agriculture & Turf. Deere's worldwide sales of agriculture
and turf equipment are forecast to increase by about 15 percent for
full-year 2012, including a negative currency-translation impact of
about 3 percent.
Farmers in the world's major markets are experiencing favorable incomes
due to strong demand for agricultural commodities. In addition, John
Deere's sales are benefiting from advanced new products being launched
throughout the world and from major expansions.
Industry farm-machinery sales in the U.S. and Canada
are forecast to rise by more than 10 percent in 2012. Overall
conditions remain positive and demand continues to be strong, especially
for high-horsepower equipment.
Full-year industry sales in the EU 27 nations of Western and Central Europe
are forecast to be flat to up 5 percent as favorable conditions in the
grain, livestock and dairy sectors outweigh general economic concerns.
Sales in the Commonwealth of Independent States are expected to be
considerably higher in 2012. Sales in Asia, while slowing, are forecast
to be up moderately. In South America, industry sales are projected to be down 5 to 10 percent from last year's attractive levels due to uncertainty in Argentina and drought conditions in parts of the region.
U.S. and Canada industry sales of turf and utility equipment are expected to be up by about 5 percent for the year.
Construction & Forestry. Deere's worldwide sales of
construction and forestry equipment are forecast to increase by about 20
percent for 2012. The gain reflects further strength in the rental,
energy, material-handling, industrial, and international sectors. Of
particular note, the company is benefiting from growth in sales to
independent rental companies, which are upgrading and replenishing their
fleets. Further, Deere's sales are being supported by a range of
advanced new products and by geographic expansion. After considerable
growth in 2011, world forestry markets are projected to be about the
same for 2012. Weakness in Europe is being offset by improvement in other international markets.
Financial Services. Full-year 2012 net income attributable to
Deere & Company for the financial services operations is expected to
be approximately $465 million, slightly
lower than the prior year. The forecast decline is primarily due to an
anticipated increase in selling, administrative and general expenses and
narrower financing spreads, largely offset by growth in the credit
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 $78.3 million for the second quarter and $171.7 million year to date, compared with $85.9 million and $169.6 million
for the respective periods last year. Results were lower for the
quarter primarily due to higher selling, administrative and general
expenses and narrower financing spreads, partially offset by growth in
the credit portfolio. Six-month results improved primarily due to growth
in the credit portfolio and a lower provision for credit losses,
partially offset by higher selling, administrative and general expenses
and narrower financing spreads.
Net receivables and leases financed by JDCC were $24.558 billion at April 30, 2012, compared with $22.482 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 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, 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
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
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.
Customer and company operations and results could be affected by changes
in weather patterns (including the effects of dry weather in parts of
the U.S. and South America); 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. The sovereign 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 in particular jurisdictions or for the benefit
of certain industries or sectors (including protectionist 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;
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; 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; 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 and the level of interest 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 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).