10-KPeriod: FY2016

DEERE & CO Annual Report, Year Ended Oct 31, 2016

Filed December 19, 2016For Securities:DE

Summary

Deere & Company's (DE) 2016 10-K filing indicates a challenging year marked by a decline in net sales and income compared to 2015. This downturn is attributed to weakness in the global agricultural and construction equipment sectors, with net sales decreasing by 8% and net income attributable to Deere & Company falling from $1.94 billion to $1.52 billion. Despite these headwinds, the company highlights adept execution of operating plans, disciplined cost management, and a broad product portfolio as factors that enabled a successful year in challenging conditions. The outlook for fiscal year 2017 anticipates lower results, projecting a net income of approximately $1.4 billion. Management acknowledges the ongoing uncertainties in global economic recovery, monetary and fiscal policies, and commodity prices, which directly impact customer demand for their equipment. However, the company expresses confidence in its more durable business model and continued focus on efficiency gains, positioning it to carry out growth plans and attract new customers globally.

Financial Highlights

32 data points
Beta

Revenue

$26.64B

31.5% Gross Margin

Net Income

$1.52B

5.7% Net Margin

EPS (Diluted)

$4.81

Free Cash Flow

$3.12B

Financial Statements
Beta
Revenue$26.64B
Cost of Revenue$18.25B
Gross Profit$8.40B
R&D Expenses$1.39B
SG&A Expenses$2.79B
Operating Expenses$24.42B
Operating Income$2.61B
Interest Expense$763.70M
Net Income$1.52B
EPS (Basic)$4.83
EPS (Diluted)$4.81
Shares Outstanding (Basic)315.20M
Shares Outstanding (Diluted)316.60M

Key Highlights

  • 1Net sales and revenues decreased by 8% to $26.64 billion in 2016, down from $28.86 billion in 2015.
  • 2Net income attributable to Deere & Company decreased by approximately 21.4% to $1.52 billion in 2016, down from $1.94 billion in 2015.
  • 3The company anticipates lower results for fiscal year 2017, projecting net income of about $1.4 billion.
  • 4Worldwide equipment operations operating profit declined to $1.88 billion in 2016 from $2.18 billion in 2015.
  • 5The financial services segment saw a decrease in net income to $468 million in 2016 from $633 million in 2015, primarily due to less favorable financing spreads and higher losses on lease residual values.
  • 6Deere & Company completed a voluntary employee separation program in Q4 2016, incurring approximately $111 million in pretax expenses, with anticipated savings of $70 million in 2017.
  • 7The company continues to manage risks related to currency exchange rates and interest rates through derivative instruments.

Frequently Asked Questions

Deere & Company's financial performance in 2016 was primarily driven by a challenging market environment characterized by weakness in the global agricultural and construction equipment sectors. This led to a decrease in net sales and a decline in net income compared to the previous year. The company cited reduced shipment volumes, unfavorable currency exchange effects, and a less favorable product mix as key factors impacting operating profit.

Deere & Company's outlook for fiscal year 2017 anticipates lower results, with management projecting a net income of approximately $1.4 billion. This forecast reflects continued uncertainty in global economic conditions, monetary and fiscal policies, and commodity prices, which are expected to impact customer demand. The company expects a decrease in overall equipment sales but is focused on efficiency gains and maintaining a durable business model.

The Financial Services segment's net income decreased to $468 million in 2016 from $633 million in 2015. This decline was primarily attributed to less favorable financing spreads, higher losses on lease residual values, and an increased provision for credit losses. The prior year's results had also benefited from a gain on the sale of the crop insurance business.

Deere & Company implemented voluntary employee separation programs in the fourth quarter of 2016 to reduce operating costs, incurring approximately $111 million in pretax expenses. These programs are expected to generate savings of about $70 million in 2017. The company also emphasizes disciplined cost management and ongoing efforts to achieve further efficiency gains as part of its strategy to navigate market challenges.