Net income attributable to Deere & Company was $617.0 million, or $1.44 per share, for the third quarter ended July 31, compared with $420.0 million, or $0.99 per share, for the same period last year, it was announced on August 18.
For the first nine months of the year, net income attributable to Deere & Company was $1.408 billion, or $3.28 per share, compared with $1.096 billion, or $2.59 per share, last year.
Worldwide net sales and revenues increased 16 percent, to $6.837 billion, for the third quarter and were up 6 percent, to $18.803 billion, for nine months. Net sales of the equipment operations were $6.224 billion for the quarter and $17.009 billion for nine months, compared with $5.283 billion and $16.030 billion for the corresponding periods last year.
"John Deere's third-quarter performance reflected the disciplined execution of our business plans and occurred despite continued weakness in certain key sectors," said Samuel R. Allen, chairman and chief executive officer. "While we have benefited from positive conditions in the U.S. farm sector, particularly in terms of demand for large equipment, European markets are down sharply. Demand for construction and forestry equipment is improved from last year but still remains far below normal levels. Nevertheless, the company has continued to extend its competitive position as a result of our focus on serving customers with advanced new products while keeping a tight rein on costs and assets."
Summary of Operations
Net sales of the worldwide equipment operations increased 18 percent for the quarter and were up 6 percent for nine months compared with a year ago. Sales included a favorable currency-translation effect of 3 percent for nine months and price increases of 2 percent for both periods. Equipment net sales in the United States and Canada increased 19 percent for the quarter and 6 percent year to date. Outside the U.S. and Canada, net sales were up 16 percent for the quarter and 7 percent for nine months. Currency translation for sales outside the U.S. and Canada had an unfavorable effect of 2 percent in the quarter and a favorable impact of 6 percent year to date.
Deere's equipment operations reported operating profit of $890 million for the quarter and $2.193 billion for nine months, compared with $452 million and $1.387 billion last year.
Benefiting the quarter's results were higher production and shipment volumes and improved price realization, partially offset by increased postretirement benefit costs. Nine-month results reflected higher production and shipment volumes, improved price realization, lower raw-material costs and the favorable effects of foreign exchange, partially offset by increased postretirement benefit costs.
Net income of the company's equipment operations, including non-controlling interests, was $512 million for the quarter and $1.135 billion for nine months, compared with $319 million and $878 million for the respective periods last year. The same operating factors noted above, along with a higher effective tax rate, affected both quarterly and nine-month results.
Financial services net income was $102.1 million for the quarter and $274.1 million for nine months compared with $102.1 million and $217.8 million last year. Results were unchanged for the quarter and higher for nine months primarily due to improved financing spreads and a lower provision for credit losses, partially offset by lower tax credits related to wind energy projects.
Company Outlook and Summary
Company equipment sales are projected to be up about 12 percent for fiscal 2010 and up about 32 percent for the fourth quarter compared with the same periods a year ago. Included are a favorable currency-translation impact of about 2 percent for the year and an unfavorable impact of about 1 percent for the quarter. For the fourth quarter, net income attributable to Deere & Company is anticipated to be approximately $375 million.
According to Allen, Deere's consistent investment in advanced new products and expanded global capacity is sustaining current performance and puts the company on a solid footing for the future. "John Deere remains well-positioned to help meet the world's growing need for agricultural commodities, shelter and infrastructure," Allen said. "In our view, these developments hold exciting potential and should strongly support our efforts to deliver value for customers and investors well into the future."
Equipment Division Performance
Agriculture and Turf: Sales increased 12 percent for the quarter largely due to higher shipment volumes and improved price realization. Sales were up 3 percent for the nine months primarily due to the favorable effects of currency translation and improved price realization, partially offset by lower shipment volumes.
Operating profit was $824 million for the quarter and $2.128 billion year to date, compared with $480 million and $1.472 billion last year. For the quarter, operating profit moved up primarily due to the impact of higher shipment and production volumes and improved price realization, partially offset by increased postretirement benefit costs. Nine-month operating profit was higher largely due to improved price realization, lower raw-material costs, favorable foreign-exchange effects and the impact of higher production volumes, partially offset by increased postretirement benefit costs.
Construction and Forestry: Construction and forestry sales rose 59 percent for the quarter and were up 29 percent for nine months mainly due to higher shipment volumes. The division had operating profit of $66 million for the quarter and $65 million for nine months, compared with last year's operating losses of $28 million in the quarter and $85 million for nine months. The improvement in both periods primarily was due to higher shipment and production volumes, partially offset by increased postretirement benefit costs.
Market Conditions and Outlook
Agriculture and Turf: Worldwide sales of the company's agriculture and turf division are forecast to increase by about 8 percent for full-year 2010, with a favorable currency-translation impact of about 2 percent.
With support from healthy farm cash receipts, solid commodity prices and low interest rates, industry farm-machinery sales in the United States and Canada are forecast to be up 5 to 10 percent for the year with much of the strength concentrated in larger equipment. In other parts of the world, industry sales in Western Europe are now forecast to decline 15 to 20 percent due to general weakness in the livestock and dairy sectors. High levels of used equipment, especially harvesting machinery, also are weighing on Western European markets. Sales in Central Europe and the Commonwealth of Independent States are expected to remain under pressure due to challenging economic conditions. Drought has affected the region as well, particularly in Russia and Kazakhstan.
In South America, industry sales are projected to increase by 25 to 30 percent mainly due to improvement in the key Brazilian and Argentinean markets. Conditions in Brazil are being helped by favorable soybean and sugarcane prices and by attractive government-supported financing. The farm economy in Argentina is benefiting from commodity prices and more-normal weather conditions.
Industry sales of turf and utility equipment in the United States and Canada are expected to be up 10 to 15 percent for the year.
Construction and Forestry: Deere's worldwide sales of construction and forestry equipment are forecast to increase by about 35 percent for full-year 2010. The increase reflects market conditions that are somewhat improved in relation to last year's severely depressed environment, as well as the division's focus on aligning factory production with demand from retail customers. Sales to independent rental companies have rebounded sharply from last year's extremely weak levels. In addition, global forestry markets are being aided by higher worldwide economic activity.
Credit: Full-year 2010 net income attributable to Deere & Company for the credit operations is forecast to be approximately $325 million. The forecast increase from 2009 is primarily due to more favorable financing spreads and a lower provision for credit losses.
