10-QPeriod: Q1 FY2014

DEERE & CO Quarterly Report for Q1 Ended Jan 31, 2014

Filed February 27, 2014For Securities:DE

Summary

Deere & Company reported solid financial results for the first quarter ended January 31, 2014. Net income attributable to the company increased by approximately 4.9% to $681.1 million, or $1.81 per diluted share, compared to $649.7 million, or $1.65 per diluted share, in the prior year's quarter. This growth was driven by a 3% increase in total net sales and revenues, reaching $7,654 million, with the equipment operations seeing a 2% rise and financial services revenues up by 11%. Despite a general forecast for moderating agricultural machinery sales in key markets, Deere's diversified business segments, particularly construction and forestry, showed robust growth. The company demonstrated prudent financial management, with a strong focus on managing costs and maintaining liquidity, as evidenced by positive operating cash flows from investing activities and significant credit facilities.

Financial Highlights

44 data points
Beta

Revenue

$7.65B

22.9% Gross Margin

Net Income

$681.00M

8.9% Net Margin

EPS (Diluted)

$1.81

Total Assets

$57.66B

Cash & Equivalents

$3.19B

Free Cash Flow

-$996.90M

Financial Statements
Beta
Revenue$7.65B
Cost of Revenue$5.20B
Gross Profit$1.75B
R&D Expenses$323.70M
SG&A Expenses$765.90M
Operating Expenses$6.69B
Operating Income$1.07B
Interest Expense$171.70M
Net Income$681.00M
EPS (Basic)$1.83
EPS (Diluted)$1.81
Shares Outstanding (Basic)371.90M
Shares Outstanding (Diluted)375.40M

Key Highlights

  • 1Net income attributable to Deere & Company increased by 4.9% to $681.1 million ($1.81/share) for the quarter, up from $649.7 million ($1.65/share) in the prior year.
  • 2Worldwide net sales and revenues grew by 3% to $7,654 million, driven by a 2% increase in equipment sales and an 11% increase in financial services revenues.
  • 3The Agriculture and Turf segment sales increased by 2%, with operating profit up 4%, while Construction and Forestry segment sales rose by 4% and operating profit saw a significant 32% increase.
  • 4Financial Services reported an 11% revenue increase and a 7% rise in net income to $142.2 million, driven by portfolio growth.
  • 5Deere maintained a strong liquidity position, with cash and cash equivalents and marketable securities totaling $4,627 million, and significant unused credit facilities.
  • 6The company repurchased approximately $477 million of its common stock during the quarter, reflecting a commitment to shareholder returns.
  • 7An impairment charge of $26.3 million was recognized for the John Deere Water operations, which are being evaluated for strategic options.

Frequently Asked Questions

Deere & Company's revenue growth was primarily driven by a 3% increase in total net sales and revenues, reaching $7,654 million. This was supported by a 2% increase in net sales from its equipment operations, particularly in the Agriculture and Turf and Construction and Forestry segments, and a notable 11% increase in revenues from its Financial Services segment.

The Agriculture and Turf segment saw a 2% increase in sales and a 4% increase in operating profit. The Construction and Forestry segment experienced a 4% increase in sales and a substantial 32% increase in operating profit. The Financial Services segment reported an 11% increase in revenues and a 7% increase in net income, largely due to portfolio growth.

For fiscal year 2014, Deere projects equipment sales to decrease by about 3% and net income to be approximately $3,300 million. Key concerns include moderating farm incomes impacting agricultural equipment demand, global economic uncertainties, and the need to comply with increasingly stringent emissions regulations for engines. Despite these challenges, the company remains focused on investments in new products and markets.

Deere maintained strong liquidity with $4,627 million in cash and cash equivalents and marketable securities. The company also has significant access to global funding markets and unused credit facilities totaling $3,168 million. Negative cash flow from operations was managed through positive cash flows from investing activities, and the company actively repurchased shares.