• Weakness in global markets for farm and construction equipment leads to decline in sales and earnings for quarter and full year.
  • All businesses remain solidly profitable, helped by sound execution and disciplined cost management.
  • 2016 forecast calls for sales decline of about 7% and earnings of approximately $1.4 billion.


MOLINE, Ill. — Net income attributable to Deere & Co. was $351.2 million, or $1.08 per share, for the fourth quarter ended Oct. 31, compared with $649.2 million, or $1.83 per share, for the same period of 2014. For fiscal 2015, net income attributable to Deere & Co. 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%, to $6.715 billion, for the fourth quarter and were down 20%, 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, 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% for the quarter and 22% for the full year compared with the same periods in 2014. Sales included price realization of 1% for the quarter and full year. Additionally, sales included an unfavorable currency-translation effect of 5% for the quarter and full year. Equipment net sales in the U.S. and Canada decreased 23% for the quarter and 18% for the full year. Outside the U.S. and Canada, net sales fell 31% for the quarter and were down 28% for the year, with unfavorable currency-translation effects of 11% and 10% 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 operating factors mentioned above, 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 & Co. 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% for fiscal 2016 and to be down about 11% for the first quarter compared with year-ago periods. Included in the forecast is a negative foreign-currency translation effect of about 2% for the full year and 4% for the first quarter. For fiscal 2016, net income attributable to Deere & Co. 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."

Equipment Division Performance

  • Agriculture & Turf. Sales fell 25% for the quarter and full year due largely to lower shipment volumes and the unfavorable effects of currency translation. These factors were partially offset by price realization.

    Operating profit was $271 million for the quarter and $1.649 billion for the year, compared with $682 million and $3.649 billion in 2014. Lower results for both periods were driven primarily by the impact of lower shipment volumes, a less favorable product mix, and the unfavorable effects of foreign-currency exchange, partially offset by price realization, lower selling, administrative and general expenses and lower production costs.
  • Construction & Forestry. Construction and forestry sales decreased 32% for the quarter and 9% for the year. Sales for both periods were lower mainly as a result of lower shipment volumes and the unfavorable effects of currency translation. For the full year, these declines were partially offset by price realization.

    Operating profit was $64 million for the quarter and $528 million for the year, compared with $228 million and $648 million in 2014. Operating profit decreased for the quarter mainly due to lower shipment volumes and the unfavorable effects of foreign-currency exchange, partially offset by lower selling, administrative and general expenses. Full-year results declined due to lower shipment volumes, the unfavorable effects of foreign exchange, and higher production costs, partially offset by price realization and lower selling, administrative and general expenses.


Market Conditions & Outlook

  • Agriculture & Turf. Deere's worldwide sales of agriculture and turf equipment are forecast to decrease by about 8% for fiscal-year 2016, including a negative currency-translation effect of about 2%.

    Industry sales for agricultural equipment in the U.S. and Canada are forecast to be down 15-20% for 2016. The decline, which reflects the impact of low commodity prices and stagnant farm incomes, is expected to be most pronounced in the sale of higher-horsepower models.

    Full-year 2016 industry sales in the EU28 are forecast to be flat to down 5%, with the decline attributable to low commodity prices and farm incomes, including further pressure on the dairy sector. In South America, industry sales of tractors and combines are projected to be down 10-15% mainly as a result of economic concerns in Brazil and uncertainty about government-sponsored financing. Asian sales are projected to be flat to down slightly, due in part to weakness in China.

    Industry sales of turf and utility equipment in the U.S. and Canada are expected to be flat to up 5% for 2016, benefiting from general economic growth.
  • Construction & Forestry. Deere's worldwide sales of construction and forestry equipment are forecast to be down about 5% for 2016, including a negative currency-translation effect of about 1%.

    The forecast decline in sales reflects the impact of weak conditions in the North American energy sector, especially in Canada, as well as lower sales outside the U.S. and Canada. In forestry, global sales are expected to be down 5-10% from last year's strong levels, primarily as a result of lower sales in the U.S. and Canada.
  • Financial Services. Fiscal-year 2016 net income attributable to Deere & Co. for the financial services operations is expected to be approximately $550 million. The outlook reflects less-favorable financing spreads and an increased provision for credit losses. Additionally, 2015 results benefited from a gain on the sale of the crop insurance business.

John Deere Capital Corp.
The following is disclosed on behalf of the company's financial services subsidiary, John Deere Capital Corp. (JDCC), in connection with the disclosure requirements applicable to its periodic issuance of debt securities in the public market.

Net income attributable to John Deere Capital Corp. was $121.8 million for the fourth quarter and $498.2 million for the full-year 2015, compared with $154.2 million and $544.2 million for the respective periods last year. The decline for the quarter was primarily due to a decline in the average credit portfolio, higher losses on residual values primarily for construction-equipment operating leases, and less favorable financing spreads, partially offset by lower selling, administrative and general expenses.

The decline for the full year was primarily due to less favorable financing spreads, higher losses on residual values primarily for construction-equipment operating leases and the unfavorable effects of foreign-currency exchange translation, partially offset by growth in the average credit portfolio and lower selling, administrative and general expenses. Full-year results for 2014 also benefited from a more favorable effective tax rate.

Net receivables and leases financed by JDCC were $32.592 billion and $32.984 billion at Oct. 31, 2015 and 2014, respectively.