MOLINE, Ill. -- Deere & Company today announced worldwide net income of $472.3 million, or $1.11 per share, for the second quarter ended April 30, compared with $763.5 million, or $1.74 per share, for the same period last year. For the first six months of the year, net income was $676.2 million, or $1.60 per share, compared with $1.133 billion, or $2.56 per share, last year.



Worldwide net sales and revenues declined 17 percent, to $6.748 billion, for the second quarter and were down 11 percent to $11.894 billion for six months compared with a year ago. Net sales of the equipment operations were $6.187 billion for the quarter and $10.747 billion for six months, compared with $7.469 billion and $11.999 billion last year.



"John Deere has completed a profitable quarter and is successfully executing plans to maintain solid performance in today's difficult economic environment," said Robert W. Lane, chairman and chief executive officer. "We are benefiting from a strong market for large farm machinery in the United States and from our continued focus on balancing production with retail activity." At the same time, the global recession and volatile foreign exchange rates have put pressure on overall results. "Clearly, operations dependent on construction activity and consumer spending are feeling the full impact of the sharp downturn," Lane said. Also of note, the company has continued to benefit from a strong liquidity position and access to global capital markets on a competitive basis.



Summary of Operations



Net sales of the worldwide equipment operations decreased 17 percent for the quarter and 10 percent for six months. Sales for both periods included price increases of 6 percent offset by an unfavorable currency-translation effect of 6 percent. Equipment net sales in the United States and Canada decreased 8 percent for the quarter and 5 percent year to date. Net sales outside the United States and Canada decreased 30 percent for the quarter and 18 percent for six months with an unfavorable currency-translation effect of 13 percent for both periods.



Deere's equipment operations reported operating profit of $628 million for the quarter and $935 million for six months, compared with $1.102 billion and $1.559 billion last year. The deterioration in both periods primarily was due to lower shipment and production volumes, higher raw-material costs and the unfavorable effects of foreign exchange, partially offset by improved price realization.



Equipment operations reported net income of $406 million for the quarter and $560 million for six months, compared with $666 million and $930 million last year. The same operating factors mentioned above, along with a lower effective tax rate, affected both quarterly and six-month results.



The company's focus on asset management continued to produce improved results. Trade receivables and inventories at the end of the quarter were $7.924 billion, or 32 percent of previous 12-month sales, compared with $8.200 billion, or 35 percent of sales, a year ago.



Financial services reported net income of $68.9 million for the quarter and $115.8 million for six months compared with $86.4 million and $184.1 million last year. Results were lower for both periods largely due to a higher provision for credit losses, lower commissions from crop insurance and narrower financing spreads. Benefits from investment tax credits related to wind energy projects partially offset these factors.



Company Outlook & Summary



The outlook for market conditions over the remainder of the year remains highly uncertain and the impact on the company's sales and earnings is difficult to assess.



Company equipment sales are projected to be down about 19 percent for the full year and down about 26 percent for the third quarter, including a negative currency-translation impact of about 5 percent for the year and about 6 percent for the quarter. Deere's net income is expected to be about $1.1 billion for 2009, with more risk on the downside.



"Although financial results are forecast to be lower in 2009, Deere will continue rigorously managing its businesses with an objective of driving improved performance throughout the cycle," Lane said. "In this regard, we are successfully executing longstanding plans to manage costs and assets effectively in all types of market conditions." Recent company actions to improve results and respond to economic challenges include selective workforce reductions, aggressive factory-schedule adjustments, and a continued emphasis on process and efficiency enhancements across the enterprise. Said Lane, "John Deere employees throughout the world are working to create a cost and asset structure that helps the company produce solid financial results while at the same time serving customers through a relentless focus on innovative products and services."



Agricultural Division Performance



Sales decreased 4 percent for the quarter largely due to the unfavorable effects of currency translation and lower shipment volumes, partially offset by improved price realization. Division sales were up 4 percent for six months. Operating profit was $635 million for the quarter and $983 million year to date, compared with $782 million and $1.114 billion for the respective periods last year. Operating profit was lower in the quarter primarily due to lower shipment and production volumes, higher raw-material costs, unfavorable impacts of foreign exchange and higher research and development expenses, partially offset by improved price realization. Six-month operating profit was lower largely due to higher raw-material costs, unfavorable foreign-exchange effects and higher research and development expenses, partially offset by improved price realization.



Market Conditions & Outlook



As previously cited, the outlook for the remainder of the year remains highly uncertain considering present global economic conditions.



Agriculture & Turf. Full-year sales of the agriculture and turf division are forecast to decrease by about 14 percent, including a negative currency-translation impact of about 6 percent. The division was created earlier this month by combining the operations of the worldwide agricultural equipment and commercial and consumer equipment divisions. Voluntary employee separations related to the new organizational structure are currently expected to result in pretax charges of approximately $50 million in the second half of 2009. Savings from the separation program of about the same amount are expected to be realized in 2010.



On an industry basis, farm-machinery sales in the United States and Canada are forecast to be flat to down slightly for the year, with support from an increase in four-wheel-drive tractors, combines, sprayers and seeding equipment. In other parts of the world, industry farm-machinery sales in Western Europe are forecast to be down 10 to 15 percent for the year. Markets have continued to deteriorate in Central Europe and the CIS (Commonwealth of Independent States) countries, where sales are expected to be sharply lower. In South America, industry sales are projected to decrease by 20 to 30 percent for the year. North American industry sales of turf equipment and compact utility tractors are expected to be down about 20 percent.



SOURCE: Deere & Company via PR Newswire.