Deere Announces Record Second-Quarter Earnings of $1.08 Billion

Deere & Co. this week said its fiscal second-quarter sales and income were the highest for any quarterly period in company history. Net income attributable to Deere & Co. for the second-quarter 2013 was $1.08 billion, or $2.76 per share, for the second quarter ended April 30, compared with $1.06 billion, or $2.61 per share, for the same period last year. For the first six months of the year, net income attributable to Deere & Co. was $1.73 billion, or $4.41 per share, compared with $1.59 billion, or $3.91 per share, last year.

Worldwide net sales and revenues increased 9 percent, to $10.91 billion, for the second quarter and rose 9 percent to $18.34 billion for six months. Net sales of the equipment operations were $10.27 billion for the quarter and $17.06 billion for six months, compared with $9.41 billion and $15.52 billion for the periods last year.

"After a record-setting second quarter, John Deere is well on its way to another year of strong performance," said Samuel Allen, chairman and CEO. "Deere's results are a reflection of positive conditions in the global farm economy, which continues to show impressive strength. The company's performance also offers further proof of the adept execution of our operating and marketing plans, which are aimed at expanding our global market presence."

Net sales of the worldwide equipment operations increased 9 percent for the quarter and 10 percent for six months compared with the same periods a year ago. Sales included price realization of 3 percent for the quarter and 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 9 percent for the quarter and 13 percent year to date. Outside the U.S. and Canada, net sales increased 9 percent for the quarter and 6 percent for six months, with unfavorable currency-translation effects of 4 percent and 3 percent for the periods.

Deere's equipment operations reported operating profit of $1.66 billion for the quarter and $2.50 billion for six months, compared with $1.52 billion and $2.22 billion last year. The improvement for both periods was primarily the result of the impact of price realization and higher shipment volumes. These factors were partially offset by increased production costs and higher selling, administrative and general expenses as well as unfavorable effects of foreign-currency exchange. The higher production costs were related primarily to manufacturing overhead expenses in support of growth and new products, engine-emission requirements, and post-retirement benefit expenses. These items were partially offset by lower raw-material costs. In addition, higher warranty costs and research and development expenses affected year-to-date results.

Financial services reported net income attributable to Deere & Co. of $125.0 million for the quarter and $257.9 million for six months compared with $109.2 million and $228.3 million last year. Results were higher for both periods primarily due to growth in the credit portfolio, partially offset by increased selling, administrative and general expenses. In addition, last year's six-month results benefited from revenue related to wind energy credits.

Construction and forestry sales decreased 6 percent for the quarter and six months mainly because of lower shipment volumes. Operating profit was $81 million for the quarter and $153 million for six months, compared with $119 million and $243 million last year.

Deere's worldwide sales of construction and forestry equipment are forecast to decrease by about 5 percent for 2013. The decline reflects a cautious outlook for U.S. economic growth, cool, wet weather conditions in North America, and flat sales in world forestry markets. In forestry, further weakness in European markets is expected to offset higher U.S. demand.

Company equipment sales are projected to increase by about 5 percent for fiscal 2013 and by about 3 percent for the third quarter compared with the same periods a year ago. Included is an unfavorable currency-translation impact of about 1 percent for the year. For the full year, net income attributable to Deere & Co. is anticipated to be about $3.3 billion.

Although Deere expects to deliver record earnings for the year, global financial pressures as well as adverse weather patterns have added a note of caution to the outlook. "Deere's near-term forecast is being tempered by lingering economic concerns in many parts of the world, which are restraining business confidence and growth," Allen said. "In addition, cool, wet weather in North America has delayed crop planting, slowed construction activity and hurt sales of turf-care equipment."

Allen said he remained confident about the company's longer-term prospects for growth. "We continue to believe our investment in new products and additional capacity will allow Deere to fully capitalize on the world's increasing need for food, shelter and infrastructure in the years ahead," he said. "These trends appear to have considerable resilience and we're confident they should prove rewarding to our customers and investors."

Net income attributable to John Deere Capital Corp. was $105.9 million for the second quarter and $210.9 million year to date, compared with $78.3 million and $171.7 million for the respective periods last year. Results improved for both periods because of growth in the credit portfolio, partially offset by higher selling, administrative and general expenses.

Net receivables and leases financed by JDCC were $28.72 billion at April 30, compared with $24.56 billion last year.

Deere & Co. is headquartered in Moline, Ill.