- Company remains solidly profitable in face of global economic
slowdown. MOLINE, Ill., May 20 /PRNewswire-FirstCall/ -- Deere
& Company today announced worldwide net income of $472.3
million, or $1.11 per share, for the second quarter ended April 30,
compared with $763.5 million, or $1.74 per share, for the same
period last year. For the first six months of the year, net income
was $676.2 million, or $1.60 per share, compared with $1.133
billion, or $2.56 per share, last year. Worldwide net sales and
revenues declined 17 percent, to $6.748 billion, for the second
quarter and were down 11 percent to $11.894 billion for six months
compared with a year ago. Net sales of the equipment operations
were $6.187 billion for the quarter and $10.747 billion for six
months, compared with $7.469 billion and $11.999 billion last year.
"John Deere has completed a profitable quarter and is successfully
executing plans to maintain solid performance in today's difficult
economic environment," said Robert W. Lane, chairman and chief
executive officer. "We are benefiting from a strong market for
large farm machinery in the United States and from our continued
focus on balancing production with retail activity." At the same
time, the global recession and volatile foreign exchange rates have
put pressure on overall results. "Clearly, operations dependent on
construction activity and consumer spending are feeling the full
impact of the sharp downturn," Lane said. Also of note, the company
has continued to benefit from a strong liquidity position and
access to global capital markets on a competitive basis. Summary of
Operations Net sales of the worldwide equipment operations
decreased 17 percent for the quarter and 10 percent for six months.
Sales for both periods included price increases of 6 percent offset
by an unfavorable currency-translation effect of 6 percent.
Equipment net sales in the United States and Canada decreased 8
percent for the quarter and 5 percent year to date. Net sales
outside the United States and Canada decreased 30 percent for the
quarter and 18 percent for six months with an unfavorable
currency-translation effect of 13 percent for both periods. Deere's
equipment operations reported operating profit of $628 million for
the quarter and $935 million for six months, compared with $1.102
billion and $1.559 billion last year. The deterioration in both
periods primarily was due to lower shipment and production volumes,
higher raw-material costs and the unfavorable effects of foreign
exchange, partially offset by improved price realization. Equipment
operations reported net income of $406 million for the quarter and
$560 million for six months, compared with $666 million and $930
million last year. The same operating factors mentioned above,
along with a lower effective tax rate, affected both quarterly and
six-month results. The company's focus on asset management
continued to produce improved results. Trade receivables and
inventories at the end of the quarter were $7.924 billion, or 32
percent of previous 12-month sales, compared with $8.200 billion,
or 35 percent of sales, a year ago. Financial services reported net
income of $68.9 million for the quarter and $115.8 million for six
months compared with $86.4 million and $184.1 million last year.
Results were lower for both periods largely due to a higher
provision for credit losses, lower commissions from crop insurance
and narrower financing spreads. Benefits from investment tax
credits related to wind energy projects partially offset these
factors. Company Outlook & Summary The outlook for market
conditions over the remainder of the year remains highly uncertain
and the impact on the company's sales and earnings is difficult to
assess. Company equipment sales are projected to be down about 19
percent for the full year and down about 26 percent for the third
quarter, including a negative currency-translation impact of about
5 percent for the year and about 6 percent for the quarter. Deere's
net income is expected to be about $1.1 billion for 2009, with more
risk on the downside. "Although financial results are forecast to
be lower in 2009, Deere will continue rigorously managing its
businesses with an objective of driving improved performance
throughout the cycle," Lane said. "In this regard, we are
successfully executing longstanding plans to manage costs and
assets effectively in all types of market conditions." Recent
company actions to improve results and respond to economic
challenges include selective workforce reductions, aggressive
factory-schedule adjustments, and a continued emphasis on process
and efficiency enhancements across the enterprise. Said Lane, "John
Deere employees throughout the world are working to create a cost
and asset structure that helps the company produce solid financial
results while at the same time serving customers through a
relentless focus on innovative products and services." * * *
Equipment Division Performance Agricultural. Sales decreased 4
percent for the quarter largely due to the unfavorable effects of
currency translation and lower shipment volumes, partially offset
by improved price realization. Division sales were up 4 percent for
six months. Operating profit was $635 million for the quarter and
$983 million year to date, compared with $782 million and $1.114
billion for the respective periods last year. Operating profit was
lower in the quarter primarily due to lower shipment and production
volumes, higher raw-material costs, unfavorable impacts of foreign
exchange and higher research and development expenses, partially
offset by improved price realization. Six-month operating profit
was lower largely due to higher raw-material costs, unfavorable
foreign-exchange effects and higher research and development
expenses, partially offset by improved price realization.
Commercial & Consumer. Sales for the commercial and consumer
equipment division declined 24 percent for both the quarter and the
first half of the year. Operating profit was $68 million for the
quarter and $10 million for six months, compared with $154 million
and $162 million a year ago. The operating-profit decline in both
periods primarily was due to lower shipment and production volumes,
the unfavorable effects of foreign exchange and higher raw-material
costs, partially offset by improved price realization and lower
selling, administrative and general expenses. Construction &
Forestry. Construction and forestry sales were down 55 percent for
the quarter and 44 percent for six months. The division had an
operating loss of $75 million in the quarter and $58 million year
to date, compared with an operating profit of $166 million and $283
million last year. The profit decrease for both periods was
primarily due to significantly lower shipment and production
volumes and higher raw-material costs, partially offset by improved
price realization and lower selling, administrative and general
expenses. Market Conditions & Outlook As previously cited, the
outlook for the remainder of the year remains highly uncertain
considering present global economic conditions. Agriculture &
Turf. Full-year sales of the agriculture and turf division are
forecast to decrease by about 14 percent, including a negative
currency-translation impact of about 6 percent. The division was
created earlier this month by combining the operations of the
worldwide agricultural equipment and commercial and consumer
equipment divisions. Voluntary employee separations related to the
new organizational structure are currently expected to result in
pretax charges of approximately $50 million in the second half of
2009. Savings from the separation program of about the same amount
are expected to be realized in 2010. On an industry basis,
farm-machinery sales in the United States and Canada are forecast
to be flat to down slightly for the year, with support from an
increase in four-wheel-drive tractors, combines, sprayers and
seeding equipment. In other parts of the world, industry
farm-machinery sales in Western Europe are forecast to be down 10
to 15 percent for the year. Markets have continued to deteriorate
in Central Europe and the CIS (Commonwealth of Independent States)
countries, where sales are expected to be sharply lower. In South
America, industry sales are projected to decrease by 20 to 30
percent for the year. North American industry sales of turf
equipment and compact utility tractors are expected to be down
about 20 percent. Construction & Forestry. Deere's worldwide
sales of construction and forestry equipment are forecast to
decline by about 42 percent for the year, largely as a consequence
of a slumping global economy and historically low levels of
construction activity in the United States. Credit. Full-year 2009
net income for Deere's credit operations is forecast to be
approximately $250 million. The forecast decrease from 2008
primarily is due to narrower financing spreads, a higher provision
for credit losses and lower commissions from crop insurance,
partially offset by benefits from investment tax credits related to
wind energy projects. John Deere Capital Corporation The following
is disclosed on behalf of the company's credit subsidiary, John
Deere Capital Corporation (JDCC), in connection with the disclosure
requirements applicable to its periodic issuance of debt securities
in the public market. JDCC's net income was $33.9 million for the
second quarter and $69.0 million year to date, compared with net
income of $77.3 million and $154.5 million for the respective
periods last year. Results were lower for both periods primarily
due to a higher provision for credit losses, lower commissions from
crop insurance and narrower financing spreads. Net receivables and
leases financed by JDCC were $19.292 billion at April 30, 2009,
compared with $19.296 billion last year. Net receivables and leases
administered, which include receivables administered but not owned,
totaled $19.455 billion at April 30, 2009, compared with $19.452
billion a year ago. Safe Harbor Statement Safe Harbor Statement
under the Private Securities Litigation Reform Act of 1995:
Statements under "Company Outlook and Summary," "Market Conditions
& Outlook," and other statements herein that relate to future
operating periods are subject to 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.
Forward-looking statements involve certain factors that are subject
to change, including for the Company's agricultural equipment the
many interrelated factors that affect farmers' confidence. These
factors include worldwide economic conditions, demand for
agricultural products, world grain stocks, weather conditions, soil
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 the U.S. and Brazil), international reaction to
such programs, global trade agreements, animal diseases and their
effects on poultry and beef consumption and prices (including avian
flu and bovine spongiform encephalopathy, commonly known as "mad
cow" disease), crop pests and diseases (including Asian rust), 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,
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, and the political
and social stability of, the global markets in which the Company
operates, especially material changes in economic activity in these
markets; customer confidence in the general economic conditions;
foreign currency exchange rates, especially fluctuations in the
value of the U.S. dollar, interest rates and inflation and
deflation rates; capital market disruptions; significant changes in
capital market liquidity, access to capital and associated funding
costs; delays or disruptions in the Company's supply chain due to
weather, natural disasters or financial hardship or the loss of
liquidity by suppliers (including common suppliers with the
automotive industry); changes in and the impact of governmental
banking, monetary and fiscal policies and governmental programs in
particular jurisdictions or for the benefit of certain sectors;
actions by rating agencies; customer access to capital for
purchases of the Company's products and borrowing and repayment
practices, the number and size of customer loan delinquencies and
defaults, and the sub-prime credit market crises; changes in the
market values of investment assets; production, design and
technological difficulties, including capacity and supply
constraints and prices; the availability and prices of
strategically sourced materials, components and whole goods;
start-up of new plants and new products; the success of new product
initiatives and customer acceptance of new products; oil and energy
prices and supplies; the availability and cost of freight; trade,
monetary and fiscal policies of various countries (including
protectionist policies that disrupt international commerce); wars
and other international conflicts and the threat thereof; actions
by the U.S. Federal Reserve Board and other central banks; actions
by the U.S. Securities and Exchange Commission; actions by
environmental, health and safety regulatory agencies, including
those related to engine emissions (in particular Tier 4 emission
requirements), noise and the risk of climate change; actions by
other regulatory bodies; 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 regulations; changes to
accounting standards; changes in tax rates and regulations; the
effects of, or response to, terrorism; and changes in laws and
regulations affecting the sectors in which the Company operates.
The spread of major epidemics (including H1N1 and other influenzas,
SARS, fevers and other viruses) also could affect Company results.
Changes in weather patterns could impact customer operations and
Company results. Company results are also affected by changes in
the level 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. Other factors that could affect results are acquisitions and
divestitures of businesses, the integration of new businesses, the
implementation of organizational changes such as combining of the
agricultural and commercial and consumer equipment divisions,
changes in Company declared dividends and common stock issuances
and repurchases. With respect to the current global economic
downturn, changes in governmental banking, monetary and fiscal
policies to restore liquidity and increase the availability of
credit may not be effective and could have a material impact on the
Company's customers and markets. Recent significant changes in
market liquidity conditions could impact access to funding and
associated funding costs, which could reduce the Company's earnings
and cash flows. The Company's investment management operations
could be impaired by changes in the equity and bond markets, which
would negatively affect earnings. General economic conditions can
affect the demand for the Company's equipment as well. Current
negative economic conditions and outlook have dampened demand for
certain equipment. Furthermore, governmental programs providing
assistance to certain industries or sectors could negatively impact
the Company's competitive position. The current economic downturn
and market volatility have adversely affected the financial
industry in which John Deere Capital Corporation and other credit
subsidiaries (Credit) operate. Credit's liquidity and ongoing
profitability 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 current levels of
market disruption and volatility continue or worsen or access to
governmental liquidity programs decreases, funding could be
unavailable or insufficient. Additionally, under current market
conditions customer confidence levels may result in declines in
credit applications and increases in delinquencies and default
rates, which could materially impact Credit's 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 most recent annual report on Form 10-K (including the
factors discussed in Item 1A. Risk Factors) and other filings with
the U.S. Securities and Exchange Commission. Second Quarter 2009
Press Release (millions of dollars) Unaudited Three Months Ended
Six Months Ended April 30 April 30 % % 2009 2008 Change 2009 2008
Change Net sales and revenues: Agricultural equipment net sales
$4,498 $4,700 -4 $7,759 $7,458 +4 Commercial and consumer equipment
net sales 1,089 1,424 -24 1,647 2,166 -24 Construction and forestry
net sales 600 1,345 -55 1,341 2,375 -44 Total Net sales * 6,187
7,469 -17 10,747 11,999 -10 Credit revenues 458 533 -14 931 1,083
-14 Other revenues 103 95 +8 216 216 Total net sales and revenues *
$6,748 $8,097 -17 $11,894 $13,298 -11 Operating profit (loss): **
Agricultural equipment $635 $782 -19 $983 $1,114 -12 Commercial and
Consumer equipment 68 154 -56 10 162 -94 Construction and forestry
(75) 166 (58) 283 Credit 58 133 -56 111 265 -58 Other 3 4 7 -43
Total operating profit * 686 1,238 -45 1,050 1,831 -43 Interest,
corporate expenses and income taxes (214) (475) -55 (374) (698) -46
Net income $472 $763 -38 $676 $1,133 -40 *Includes equipment
operations outside the U.S. and Canada as follows: Net sales $2,155
$3,062 -30 $3,972 $4,870 -18 Operating Profit $88 $383 -77 $166
$593 -72 The company views its operations as consisting of two
geographic areas: the "U.S. and Canada" and "outside the U.S. and
Canada". **Operating profit (loss) is income from continuing
operations before external interest expense, certain foreign
exchange gains and losses, income taxes and corporate expenses.
However, operating profit of the credit segment includes the effect
of interest expense and foreign exchange gains or losses.
DATASOURCE: Deere & Company CONTACT: Ken Golden, Director,
Strategic Public Relations of Deere & Company, +1-309-765-5678
Web Site: http://www.deere.com/
Copyright
