Deere & Company announced November 25 that net income attributable to the Moline, Ill.-based company was $351.2 million, or $1.08 per share, for the fourth quarter ended Oct. 31, 2015, compared with $649.2 million, or $1.83 per share, for the same period of 2014. For fiscal 2015, net income attributable to Deere & Company was $1.940 billion, or $5.77 per share, compared with $3.162 billion, or $8.63 per share, last year.
Worldwide net sales and revenues decreased 25 percent, to $6.715 billion, for the fourth quarter and were down 20 percent, to $28.863 billion, for the full year. Net sales of the equipment operations were $5.932 billion for the quarter and $25.775 billion for the year, compared with $8.043 billion and $32.961 billion for the same periods in 2014.
“John Deere has completed a successful year in the face of further weakness in the global agricultural sector and a slowdown in construction-equipment markets,” said Samuel R. Allen, Deere & Company chairman and chief executive officer. “Sales and earnings for the year were the sixth-highest in company history, a notable achievement in light of the challenging market conditions we experienced. The company’s performance benefited from the adept execution of our business plans and disciplined cost management. As a result, Deere remains well positioned to serve its customers while continuing to make investments in quality and innovation that are designed to drive growth in the future.”
Summary of Operations
Net sales of the worldwide equipment operations declined 26 percent for the quarter and 22 percent for the full year compared with the same periods in 2014. Sales included price realization of 1 percent for the quarter and full year. Additionally, sales included an unfavorable currency-translation effect of 5 percent for the quarter and full year. Equipment net sales in the United States and Canada decreased 23 percent for the quarter and 18 percent for the full year. Outside the U.S. and Canada, net sales fell 31 percent for the quarter and were down 28 percent for the year, with unfavorable currency-translation effects of 11 percent and 10 percent for these periods.
Deere’s equipment operations reported operating profit of $335 million for the quarter and $2.177 billion for the full year, compared with $910 million and $4.297 billion in 2014. 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. In the quarter, these factors were partially offset by lower production costs, lower selling administrative and general expenses, and price realization. The full-year reduction in operating profit was partially offset by price realization, lower selling, administrative and general expenses and lower production costs.
Net income of the company’s equipment operations was $200 million for the fourth quarter and $1.308 billion for the year, compared with $488 million and $2.548 billion in 2014. In addition to the aforementioned operating factors, a lower effective tax rate benefited both quarterly and annual results. The lower rate resulted mainly from a reduction of a valuation allowance recorded during the quarter due to a change in the expected realizable value of a deferred tax asset.
Financial services reported net income attributable to Deere & Company of $153.0 million for the quarter and $632.9 million for the year, compared with $172.2 million and $624.5 million in 2014. Lower results for the quarter were primarily due to the unfavorable effects of foreign-currency exchange translation, and higher losses on residual values primarily for construction-equipment operating leases, partially offset by lower selling, administrative and general expenses. Results for the year improved due to growth in the average credit portfolio, the previously announced crop insurance sale and higher crop insurance margins experienced prior to divestiture, and lower selling, administrative and general expenses. These factors were partially offset by the unfavorable effects of foreign-currency exchange translation, less-favorable financing spreads, and higher losses on residual values primarily for construction-equipment operating leases. Full-year results in 2014 also benefited from a more favorable effective tax rate.
Company Outlook & Summary
Company equipment sales are projected to decrease about 7 percent for fiscal 2016 and to be down about 11 percent for the first quarter compared with year-ago periods. Included in the forecast is a negative foreign-currency translation effect of about 2 percent for the full year and 4 percent for the first quarter. For fiscal 2016, net income attributable to Deere & Company is anticipated to be about $1.4 billion.
“Although our forecast calls for lower results in the year ahead, the outlook represents a level of performance that is considerably better than we have experienced in previous downturns,” Allen said. “This shows the continuing success of our efforts to establish a more durable business model and a wider range of revenue sources.”
Longer term, Allen reaffirmed his belief the future holds great promise for the company. “John Deere remains in a strong position to carry out its growth plans and attract new customers throughout the world,” he said. “Thanks to the commitment of our employees, dealers and suppliers, our plans for helping meet the world’s increasing need for food, shelter and infrastructure are continuing to move ahead. These trends in our view remain quite compelling and have ample staying power. All in all, we have confidence in the company’s present direction and firmly believe it is on track to deliver significant value to our customers and investors in the years to come.”
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