- Earnings per share climb 60%; net sales and revenues up 18%.
- Strong global farm sector driving improvement in agricultural machinery.
- Construction and forestry results higher in spite of weakening U.S.
- Forecast for year's sales and profit revised upward.
MOLINE, Ill., Feb. 13 /CNW/ -- Deere & Company today announced worldwide
net income of $369.1 million, or $0.83 per share, for the first quarter ended
January 31, compared with $238.7 million, or $0.52 per share, for the same
period last year. Worldwide net sales and revenues increased 18 percent to
$5.201 billion for the quarter compared with $4.425 billion a year ago. Net
sales of the equipment operations were $4.531 billion for the period compared
with $3.815 billion last year.
Strongly favorable conditions throughout the global farm sector, coupled
with a positive customer response to the company's product lineup, are
continuing to drive results, noted Robert W. Lane, chairman and chief
executive officer. "Advanced product offerings that help John Deere customers
be more profitable and productive are supporting the company's financial
performance and helping expand our global market presence," he said. "Further,
benefiting from our ongoing actions to create a fundamentally more resilient,
more successful business, Deere's non-agricultural operations remain on a
profitable course in spite of weakening economic conditions in the United
Summary of Operations
Net sales of the worldwide equipment operations increased 19 percent for
the quarter, including positive effects for currency translation and price
changes of 6 percent. Equipment sales in the United States and Canada were up
9 percent for the quarter. Net sales outside the United States and Canada
increased by 37 percent, which included a positive currency-translation effect
of 11 percent.
Deere's equipment divisions reported operating profit of $457 million for
the quarter compared with $270 million last year. The improvement was largely
due to the favorable impact of higher sales and production volumes and
improved price realization, partially offset by higher selling, administrative
and general expenses and raw-material costs.
Trade receivables and inventories at the end of the quarter were $6.488
billion, or 29 percent of previous 12-month sales, compared with $5.672
billion, or 28 percent of sales, a year ago.
Financial services reported net income of $97.7 million for the quarter
compared with $88.2 million last year. The improvement was primarily due to
growth in the credit portfolio, higher crop insurance income and a lower
effective tax rate. Higher interest expense resulting from increased leverage,
higher selling, administrative and general expenses, and an increase in the
provision for credit losses partially offset the improvements.
Company equipment sales are projected to increase by about 17 percent for
full-year 2008 and to be up approximately 23 percent for the second quarter.
Currency accounts for approximately 3 percent of the sales increase for both
periods. Deere's net income is forecast to be about $2.2 billion for the year
and in a range of $700 million to $725 million for the second quarter.
Deere's performance is receiving support from the company's actions to
produce stronger, more sustainable financial results, to attract and serve
customers throughout the world, and from positive global economic trends. "We
are making the investments necessary to serve a growing customer base in all
our businesses," Lane said. "At the same time, the company remains in a prime
position to benefit from powerful trends sweeping the world, such as growing
affluence, increasing demand for food and infrastructure, and the rising use
of biofuels." On the strength of these factors, Lane believes the company is
on track to continue delivering strong financial results and solid investor
Equipment Division Performance
Agricultural. Sales increased 33 percent for the quarter, primarily as a
result of higher volumes, the favorable effects of currency translation, and
improved price realization. Operating profit was $332 million compared with
$137 million last year. The profit increase was primarily due to the favorable
impact of higher sales and production volumes and improved price realization,
partially offset by higher selling, administrative and general expenses
attributable in large part to currency translation. Also affecting the
quarter's results were increased research and development expenses.
Commercial & Consumer. Division sales were up 16 percent for the quarter.
LESCO operations, acquired in the third quarter of 2007, accounted for 14
percent of the sales increase. The division had operating profit of $8 million
for the quarter, compared with $38 million a year ago. The profit decline was
primarily due to higher selling, administrative and general expenses from
LESCO, partially offset by higher sales volumes.
Construction & Forestry. Though sales declined 6 percent, operating
profit rose to $117 million for the quarter, versus $95 million a year ago.
The profit increase was mainly due to improved price realization and the
positive effect of production levels in closer alignment with retail demand,
partially offset by higher raw-material costs and lower sales volumes.
Market Conditions & Outlook
Agricultural. With support from continuing strength in the global farm
sector, worldwide sales of John Deere agricultural equipment are expected to
increase by about 28 percent for full-year 2008. This includes about 4 percent
related to currency translation.
Farm conditions throughout the world remain quite positive, benefiting
from healthy commodity prices and demand for renewable fuels. Recently enacted
energy legislation in the United States requires a significant increase in
renewable-fuel production through 2022. Relative to consumption, global grain
stocks such as wheat and corn are forecast to remain at or near 30-year lows.
In addition, a large number of advanced new John Deere products coming to
market in 2008 are expected to lend support to sales of agricultural
On an industry basis, farm machinery sales in the United States and
Canada are forecast to be up 15 to 20 percent for the year. Large tractors and
combines are expected to lead the improvement while demand for cotton
equipment is projected to be down. Overall farm machinery sales are expected
to benefit from a significant increase in farm cash receipts, related in large
part to higher crop prices.
Industry sales in Western Europe are forecast to be up 3 to 5 percent for
the year. Greater increases are expected in Eastern Europe and the CIS
(Commonwealth of Independent States) countries, including Russia, where demand
for productive farm machinery is experiencing rapid growth. South American
markets are expected to show further improvement in 2008, with industry sales
forecast to increase by 15 percent or more. Despite strong commodity-price
support, however, farm machinery demand in Brazil could be affected by
uncertainties over government-backed financing programs. Deere sales are
expected to be helped by an expanded product line and additional capacity
associated with the start-up of a world-class tractor-manufacturing facility
in Brazil and by higher demand for the company's innovative sugarcane-
Commercial & Consumer. John Deere commercial and consumer equipment
sales are projected to be up about 8 percent for the year, including about 7
percent from a full year of LESCO sales. Sales gains from new products, such
as an expanded line of innovative commercial mowing equipment, are expected to
more than offset market weakness related to the U.S. housing slowdown and
rising costs for fertilizer and other lawn-maintenance supplies.
Construction & Forestry. U.S. markets for construction and forestry
equipment are forecast to remain under continued pressure due in large part to
a continuing slump in housing starts. It is expected that housing activity in
2008 will remain far below last year in spite of recent interest-rate
reductions. Non-residential construction is expected to remain in line with
last year's relatively strong levels. Although the U.S. housing sector is
negatively affecting forestry equipment markets in the United States and
Canada, forestry sales on a worldwide basis are projected to rise in 2008 due
to economic growth in other regions.
Despite a generally weak environment, Deere sales are expected to benefit
from new products and factory-production levels in closer alignment with
retail demand. For 2008, the company's worldwide sales of construction and
forestry equipment are forecast to be approximately equal to the prior year.
Credit. Full-year 2008 net income for Deere's credit operations is
forecast to be approximately $365 million. The improvement is expected to be
driven by growth in the credit portfolio and higher crop insurance income,
partially offset by increased interest expense resulting from higher leverage.
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
JDCC's net income was $77.2 million for the first quarter, compared with
net income of $73.2 million a year ago. The improvement was primarily due to
increased crop insurance income, growth in the credit portfolio and a lower
effective tax rate. Increased selling, administrative and general expenses,
higher interest expense resulting from increased leverage, and a higher
provision for credit losses partially offset the improvements.
Net receivables and leases financed by JDCC were $18.261 billion at
January 31, 2008, compared with $17.257 billion last year. Net receivables and
leases administered, which include receivables previously sold, totaled
$18.470 billion at January 31, 2008, compared with $18.050 billion one year
Safe Harbor Statement
Safe Harbor Statement under the Private Securities Litigation Reform Act
of 1995: Statements under "Company Outlook," "Company 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 segment the many
interrelated factors that affect farmers' confidence. These factors include
worldwide 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 (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 bovine spongiform
encephalopathy, commonly known as "mad cow" disease, and avian flu), 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 commercial and consumer
equipment segment include weather conditions, general economic conditions,
customer profitability, consumer confidence, 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, the number of
housing starts, and interest rates are especially important to sales of the
Company's construction 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; production, design and
technological difficulties, including capacity and supply constraints and
prices, including for supply commodities such as steel, rubber and fuel; the
availability and prices of strategically sourced materials, components and
whole goods; delays or disruptions in the Company's supply chain due to
weather or natural disasters; 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; inflation and deflation rates, interest
rate levels and foreign currency exchange rates; the availability and cost of
freight; trade, monetary and fiscal policies of various countries; 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 regulatory agencies,
including those related to engine emissions and the risk of global warming;
actions by other regulatory bodies; actions by rating agencies; capital market
disruptions; customer borrowing and repayment practices, the number and size
of customer loan delinquencies and defaults, and the sub-prime credit market
crises; 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; changes to
accounting standards; changes in tax rates; 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 influenza,
SARS, fevers and other viruses) also could affect 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 changes in
Company declared dividends, acquisitions and divestitures of businesses and
common stock issuances and repurchases.
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.
First Quarter 2008 Press Release
(millions of dollars)
Three Months Ended
2008 2007 Change
Net sales and revenues:
Agricultural equipment net sales $2,758 $2,081 +33
Commercial and consumer equipment
net sales 743 641 +16
Construction and forestry net sales 1,030 1,093 -6
Total net sales * 4,531 3,815 +19
Credit revenues 550 493 +12
Other revenues 120 117 +3
Total net sales and revenues * $5,201 $4,425 +18
Operating profit: **
Agricultural equipment $332 $137 +142
Commercial and consumer equipment 8 38 -79
Construction and forestry 117 95 +23
Credit 133 132 +1
Other 3 2 +50
Total operating profit * 593 404 +47
Interest, corporate expenses and
income taxes (224) (165) +36
Net income $369 $239 +54
* Includes equipment operations outside the U.S. and Canada as follows:
Net sales $1,808 $1,324 +37
Operating profit $210 $83 +153
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 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.
For further information:
For further information: Ken Golden, Director, Strategic Public
Relations of Deere & Company, +1-309-765-5678 Web Site: http://www.deere.com