- Weaker conditions in global farm economy contribute to lower results.
- Construction and forestry and financial services operations have higher profits.
- Further progress shown managing costs and assets.

MOLINE, Ill. — Net income attributable to Deere & Co. was $386.8 million, or $1.12 per share, for the first quarter ended January 31, compared with $681.1 million, or $1.81 per share, for the same period last year.

Worldwide net sales and revenues for the first quarter decreased 17%, to $6.383 billion, compared with $7.654 billion last year. Net sales of the equipment operations were $5.605 billion for the quarter compared with $6.949 billion a year ago.

"Deere's first-quarter performance reflected sluggish conditions in the global farm sector, which reduced demand for agricultural machinery, particularly larger models, and led to lower sales and income," said Samuel R. Allen, chairman and chief executive officer. "At the same time, our construction and forestry and financial services divisions had higher profits, showing the benefit of a well-rounded business lineup. Deere's results also demonstrated the progress we've made creating a more flexible, responsive cost structure."

Summary of Operations

Net sales of the worldwide equipment operations declined 19% for the quarter. Sales included price realization of 1% and an unfavorable currency-translation effect of 2%. Equipment net sales in the United States and Canada decreased 14%. Outside the U.S. and Canada, net sales were down 28%, with an unfavorable currency-translation effect of 5%.

Deere's equipment operations reported operating profit of $414 million for the quarter, compared with $891 million last year. The decline for the quarter was due primarily to lower shipment volumes and the impact of a less favorable product mix, partially offset by lower selling, administrative and general expenses and price realization. Net income of the company's equipment operations was $241 million for the quarter, compared with $543 million in 2014.

Financial services reported net income attributable to Deere & Company of $156.8 million for the quarter compared with $142.2 million last year. The improvement was primarily due to growth in the credit portfolio and higher insurance margins, partially offset by less favorable financing spreads. Last year's results also benefited from a more favorable effective tax rate.

Company Outlook & Summary

Company equipment sales are projected to decrease about 17% for fiscal 2015 and be down about 19% for the second quarter compared with year-ago periods. Included in the forecast is a negative currency-translation effect of about 3% for the full year and 4% for the second quarter. For fiscal 2015, net income attributable to Deere & Company is anticipated to be about $1.8 billion.

"Even with a continued pullback in the agricultural sector, John Deere expects to remain solidly profitable in 2015," Allen said. "Our forecast reflects a level of results much better than we've experienced in previous downturns. This illustrates our success establishing a wider range of revenue sources and a more durable business model."

Longer term, the company's future continues to hold great promise for customers and investors, Allen said. "Global population growth and rising living standards are powerful trends largely unaffected by periodic swings in the farm economy. At the same time, Deere's plans for reaching out to new markets and customer groups are making progress. For these reasons, we remain confident about the company's ability to deliver solid returns throughout the business cycle and to benefit from the world's need for productive equipment in the future."

Equipment Division Performance

Agriculture & Turf. Sales decreased 27% for the quarter due largely to lower shipment volumes, the previously announced sales of John Deere Landscapes and John Deere Water, and the unfavorable effects of currency translation. These factors were partially offset by price realization.

Operating profit was $268 million compared with $797 million for the quarter last year. Lower results were driven primarily by reduced shipment volumes and a less favorable sales mix, partially offset by lower selling, administrative and general expenses and price realization.

Construction & Forestry. Construction and forestry sales increased 13% for the quarter mainly as a result of higher shipment volumes. Operating profit was $146 million for the quarter compared with $94 million in 2014. The improvement was due to higher shipment volumes, partially offset by higher sales-incentive costs and the unfavorable effects of foreign-currency exchange.

Market Conditions & Outlook

Agriculture & Turf. Deere's worldwide sales of agriculture and turf equipment are forecast to decrease by about 23% for fiscal year 2015, including a negative currency-translation effect of about 4%.

Lower commodity prices and falling farm incomes are putting pressure on demand for agricultural machinery, especially for larger models. Conditions are more positive in the U.S. livestock sector, supporting the sale of smaller sizes of equipment. Based on these factors, industry sales for agricultural equipment in the U.S. and Canada are forecast to be down 25-30% for 2015.

Full-year 2015 industry sales in the EU28 are forecast to be down about 10%, with the decline attributable to lower crop prices and farm incomes as well as 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 uncertainty in Brazil. Industry sales in the Commonwealth of Independent States are expected to be down significantly due to economic pressures and tight credit conditions in the region. Asian sales are projected to be down slightly, with most of the decline occurring in China and India.

Industry sales of turf and utility equipment in the U.S. and Canada are expected to be flat to up 5% for 2015, benefiting from general economic growth.

Construction & Forestry. Deere's worldwide sales of construction and forestry equipment are forecast to increase by about 5% for 2015. The gain reflects economic growth and higher housing starts in the U.S. offset in part by weakening conditions in the energy sector and energy-producing regions. Global forestry sales are expected to hold steady with the attractive levels of 2014, as gains in the U.S. and Europe are offset by declines elsewhere.

Financial Services. Fiscal-year 2015 net income attributable to Deere & Company for the financial services operations is expected to be approximately $630 million. The outlook reflects the expected impact of the previously announced agreement to sell the crop insurance operations and growth in the average credit portfolio. These factors are projected to be partially offset by lower financing spreads, an expected increase in the provision for credit losses from the low level in 2014 and a less favorable tax rate.

John Deere Capital Corp.

The following is disclosed on behalf of the company's financial services subsidiary, John Deere Capital Corporation (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 Corporation was $133.6 million for the first quarter, compared with $136.5 million last year. Lower results for the quarter were primarily due to a less favorable effective tax rate and lower financing spreads, partially offset by growth in the credit portfolio.

Net receivables and leases financed by JDCC were $31.508 billion and $30.019 billion at January 31, 2015 and 2014, respectively.