Deere Announces Third-Quarter Earnings of $512 Million

• Lower demand for agricultural and construction equipment leads to decline in sales and earnings.

• All businesses remain solidly profitable.

• Results aided by sound execution and cost management.

Net income attributable to Deere & Company was $511.6 million, or $1.53 per share, for the third quarter ended July 31, compared with $850.7 million, or $2.33 per share, for the same period last year. 

For the first nine months of the year, net income attributable to Deere & Company was $1.589 billion, or $4.67 per share, compared with $2.513 billion, or $6.79 per share, last year. 

Worldwide net sales and revenues decreased 20 percent, to $7.594 billion, for the third quarter and were down 18 percent, to $22.147 billion, for nine months. Net sales of the equipment operations were $6.840 billion for the quarter and $19.843 billion for nine months, compared with $8.723 billion and $24.918 billion for the periods last year. 

"John Deere's third-quarter results reflected the continuing impact of the downturn in the farm economy as well as lower demand for construction equipment," said Samuel  R. Allen, chairman and chief executive officer. "Nevertheless, all of Deere’s businesses remained solidly profitable, benefiting from the sound execution of our business plans and the success of our efforts to develop a more agile cost structure. As a result, the company continues to be well-positioned to provide customers with technologically advanced products and services, while funding its growth plans and returning cash to stockholders." 

Summary of Operations

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Net sales of the worldwide equipment operations declined 22 percent for the quarter and 20 percent for nine months compared with the same periods a year ago. Sales included price realization of 2 percent for the quarter and nine months. Additionally, sales included an unfavorable currency-translation effect of 6 percent for the quarter and 4 percent for nine months. Equipment net sales in the United States and Canada decreased 21 percent for the quarter and 17 percent year to date. Outside the U.S. and Canada, net sales fell 23 percent for the quarter and 26 percent for nine months, with unfavorable currency-translation effects of 12 percent and 9 percent for the periods. 

Deere's equipment operations reported operating profit of $601 million for the quarter and $1.842 billion for nine months, compared with $1.135 billion and $3.387 billion last year. For both periods, the decline was due primarily to lower shipment volumes, the impact of a less favorable product mix, and the unfavorable effects of foreign-currency exchange. These factors were partially offset by price realization and lower production costs for the quarter and by price realization, lower selling, administrative and general expenses, and lower production costs for the year to date. 

Net income of the company's equipment operations was $344 million for the third quarter and $1.109 billion for the first nine months, compared with $680 million and $2.061 billion in 2014. In addition to the operating factors mentioned above, a lower effective tax rate benefited both quarterly and year-to-date results. 

Financial services reported net income attributable to Deere & Company of $153.4 million for the quarter and $480.0 million for nine months compared with $162.3 million and $452.2 million last year. Lower results for the quarter were primarily due to less favorable financing spreads, partially offset by lower selling, administrative and general expenses. Year-to-date results improved as a result of the previously announced crop insurance sale and higher crop insurance margins experienced prior to divestiture, growth in the average credit portfolio, and lower selling, administrative and general expenses, partially offset by less favorable financing spreads. Year-to-date results in 2014 also benefited from a more favorable effective tax rate. 

Company Outlook & Summary

Company equipment sales are projected to decrease about 21 percent for fiscal 2015 and to be down about 24 percent for the fourth 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 5 percent for the fourth quarter. For fiscal 2015, net income attributable to Deere & Company is anticipated to be about $1.8 billion. 

According to Allen, Deere's performance in 2015 underscores its success establishing a wider range of revenue sources and more durable business model. "By continuing to report solid profits in a difficult environment, the company is showing great resilience and performing much better than in previous agricultural downturns." 

Longer term, Allen said he remained quite confident about the company’s prospects. "We believe our steady investment in new products and geographies will make Deere the provider of choice for a growing global customer base and that the impact of these actions will become increasingly clear when our end markets recover," said Allen. "In our view, favorable trends based on a growing, more affluent, and increasingly mobile population, have ample staying power. For all these reasons, we have confidence in the company’s present course and its ability to deliver significant value to customers and investors in the years ahead."