Deere Reports Net Income of $1.245 Billion for Fourth Quarter, $7.1 Billion for Fiscal Year

PRNewswire 21-Nov-2024 6:23 AM

• Results demonstrate solid execution despite ongoing market challenges.
• Full-year 2025 earnings projected to range from $5.0 to $5.5 billion, highlighting improved structural performance.
• Remain committed to making investments that enhance customer productivity and profitability.

MOLINE, Ill., Nov. 21, 2024 /PRNewswire/ -- Deere & Company ($DE) reported net income of $1.245 billion for the fourth quarter ended October 27, 2024, or $4.55 per share, compared with net income of $2.369 billion, or $8.26 per share, for the quarter ended October 29, 2023. For fiscal-year 2024, net income attributable to Deere & Company was $7.100 billion, or $25.62 per share, compared with $10.166 billion, or $34.63 per share, in fiscal 2023.

Worldwide net sales and revenues decreased 28 percent, to $11.143 billion, for the fourth quarter of fiscal 2024 and decreased 16 percent, to $51.716 billion, for the full year. Net sales were $9.275 billion for the quarter and $44.759 billion for the year, compared with $13.801 billion and $55.565 billion in fiscal 2023, respectively.

"Amid significant market challenges this year, we proactively adjusted our business operations to better align with the current environment," said John May, chairman and CEO of Deere & Company. "Together with the structural improvements made over the past several years, these adjustments enable us to serve our customers more effectively and achieve strong results across the business cycle."

Company Outlook & Summary

Net income attributable to Deere & Company for fiscal 2025 is forecasted to be in a range of $5.0 billion to $5.5 billion.

"As we navigate ongoing headwinds across our markets, we remain committed to making meaningful investments in our future while deepening our relationships with customers," May continued. "Our team of over 75,000 dedicated employees come to work each day with a singular focus: delivering products and solutions that enhance efficiency and reduce operating costs for our customers. By providing the essential tools they need, we empower our customers to succeed and thrive in an ever-evolving and challenging landscape."

Results for the presented periods were affected by special items. See Note 1 of the financial statements for further details.

Production and precision agriculture sales decreased for the quarter due to lower shipment volumes. Operating profit decreased primarily due to lower shipment volumes / sales mix, partially offset by lower production costs.

Small agriculture and turf sales decreased for the quarter due to lower shipment volumes, partially offset by price realization. Operating profit decreased due to lower shipment volumes / sales mix and special items described in Note 1, partially offset by price realization and lower warranty expenses.

Construction and forestry sales decreased for the quarter due to lower shipment volumes. Operating profit decreased primarily due to lower shipment volumes / sales mix, partially offset by lower production costs and the special items described in Note 1.

Financial services net income for the quarter decreased due to a higher provision for credit losses, partially offset by income earned on higher average portfolio balances, a reduction in derivative valuation adjustments, and lower SA&G expenses. The results of the current quarter were also affected by the increased valuation allowance on assets held for sale of Banco John Deere S.A. See Note 1 of the financial statements for further details.

FORWARD-LOOKING STATEMENTS

Certain statements contained herein, including in the section entitled "Company Outlook & Summary," "Industry Outlook," "Deere Segment Outlook," and "Condensed Notes to Consolidated Financial Statements" relating to future events, expectations, and trends constitute "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995 and involve factors that are subject to change, assumptions, risks, and uncertainties that could cause actual results to differ materially. Some of these risks and uncertainties could affect all lines of the company's operations generally while others could more heavily affect a particular line of business.

Forward-looking statements are based on currently available information and current assumptions, expectations, and projections about future events and should not be relied upon. Except as required by law, the company expressly disclaims any obligation to update or revise its forward-looking statements. Many factors, risks, and uncertainties could cause actual results to differ materially from these forward-looking statements. Among these factors are risks related to:

• the agricultural business cycle, which can be unpredictable and is affected by factors such as world grain stocks, harvest yields, available farm acres, acreage planted, soil conditions, prices for commodities and livestock, input costs, availability of transport for crops as well as adverse macroeconomic conditions, including unemployment, inflation, interest rate volatility, changes in consumer practices due to slower economic growth, and regional or global liquidity constraints; these constraints may impact our customers and dealers, resulting in higher provisions for credit losses and write-offs;
• uncertainty of government policies and actions after recent U.S. elections in respect to global trade, tariffs, trade agreements, and the uncertainty of our ability to sell products internationally based on these actions and policies;
• higher interest rates and currency fluctuations which could adversely affect the U.S. dollar, customer confidence, access to capital, and demand for the company's products and solutions;
• the company's ability to adapt in highly competitive markets;
• housing starts and supply, real estate and housing prices, levels of public and non-residential construction, and infrastructure investment;
• political, economic, and social instability of the geographies in which the company operates, including the ongoing war between Russia and Ukraine and the conflict in the Middle East;
• worldwide demand for food and different forms of renewable energy impacting the price of farm commodities and consequently the demand for the company's equipment;
• availability and price of raw materials, components, and whole goods;
• delays or disruptions in the company's supply chain;
• suppliers' and manufacturers' business practices and compliance with applicable laws such as human rights, safety, environmental, and fair wages;
• changes in climate patterns, unfavorable weather events, and natural disasters;
• loss of or challenges to intellectual property rights;
• rationalization, restructuring, relocation, expansion and/or reconfiguration of manufacturing and warehouse facilities;
• the ability to execute business strategies, including the company's Smart Industrial Operating Model and Leap Ambitions;
• the ability to understand and meet customers' changing expectations and demand for the company's products and solutions, including delivery and utilization of precision technology;
• accurately forecasting customer demand for products and services and adequately managing inventory;
• dealer practices and their ability to manage inventory and distribution of the company's products and to provide support and service for precision technology solutions;
• the ability to realize anticipated benefits of acquisitions and joint ventures, including challenges with successfully integrating operations and internal control processes;
• negative claims or publicity that damage the company's reputation or brand;
• the ability to attract, develop, engage, and retain qualified employees;
• the impact of workforce reductions on company culture, employee retention and morale, and institutional knowledge;
• labor relations and contracts, including work stoppages and other disruptions;
• security breaches, cybersecurity attacks, technology failures, and other disruptions to the company's information technology infrastructure and products;
• leveraging artificial intelligence and machine learning within the company's business processes;
• changes to governmental communications channels (radio frequency technology);
• changes to existing laws and regulations, including the implementation of new, more stringent laws, as well as compliance with a variety of U.S., foreign and international laws, regulations, and policies relating to, but not limited to the following: advertising, anti-bribery and anti-corruption, anti-money laundering, antitrust, consumer finance, cybersecurity, data privacy, encryption, environmental (including climate change and engine emissions), farming, health and safety, foreign exchange controls and cash repatriation restrictions, foreign ownership and investment, human rights, import / export and trade, labor and employment, product liability, telematics, and telecommunications;
• governmental and other actions designed to address climate change in connection with a transition to a lower-carbon economy;
• investigations, claims, lawsuits, or other legal proceedings; and
• warranty claims, post-sales repairs or recalls, product liability litigation, and regulatory investigations as a result of the deficient operation of the company's products.

Further information concerning the company or its businesses, including factors that could materially affect the company's financial results, is included in the company's filings with the SEC (including, but not limited to, the factors discussed in Item 1A. "Risk Factors" of the company's most recent Annual Report on Form 10-K and subsequent Quarterly Reports on Form 10-Q). There also may be other factors that the company cannot anticipate or that are not described herein because the company does not currently perceive them to be material.

DEERE & COMPANY
Condensed Notes to Consolidated Financial Statements
(In millions of dollars) Unaudited

(1)   Special Items

2024

Legal Settlements

The company reached legal settlements concerning patent infringement claims. As a result of these settlements, in the fourth quarter of 2024, the company recognized a total of $57 million pretax gain ($45 million after-tax) in "Other Income," providing a benefit of $17 million to production and precision agriculture (PPA) and $40 million to construction and forestry (CF). These settlements resolve the disputes without any admission of liability by the parties involved. The company believes that these settlements enhance its ability to protect its intellectual property and reinforce its commitment to innovation and technological advancement.

Impairment

In the fourth quarter of 2024, the company recorded a non-cash charge of $28 million pretax and after-tax in "Equity in income (loss) of unconsolidated affiliates" for an other than temporary decline in value of an investment recorded in small agriculture and turf (SAT).

Employee-Separation Programs

In the third quarter of 2024, the company implemented employee-separation programs for its salaried workforce in several geographic areas, including the United States, Europe, Asia, and Latin America. The programs' main purpose was to help meet the company's strategic priorities while reducing overlap and redundancy in roles and responsibilities. The programs were largely involuntary in nature with the expense recorded when management committed to a plan, the plan was communicated to the employees, and the employees were not required to provide service beyond the legal notification period. For the limited voluntary employee-separation programs, the expense was recorded in the period in which the employee irrevocably accepted a separation offer.

The programs' total pretax expenses are estimated to be approximately $165 million. In 2024, $157 million pretax ($124 million after-tax) expenses were recorded related to the programs, of which $130 million was paid in 2024 and the remainder is expected to be paid in 2025. The remaining expenses are associated with programs in international locations and are expected to be recorded and paid in 2025. The programs' pretax expenses recorded for the periods ended October 27, 2024 by operating segment, PPA, SAT, CF, and financial services (FS), were as follows in millions of dollars:

*Relates primarily to corporate expenses.

Annual pretax savings from these programs are estimated to be approximately $220 million. Approximately $100 million of savings was realized in 2024.

Banco John Deere S.A.

In August 2024, the company entered into a joint venture agreement with a Brazilian bank, Banco Bradesco S.A. (Bradesco), for Bradesco to invest and become 50 percent owner of the company's wholly owned subsidiary in Brazil, Banco John Deere S.A. (BJD). BJD is included in the company's financial services segment and finances retail and wholesale loans for agricultural, construction, and forestry equipment. The transaction will reduce the company's incremental risk as it continues to grow in the Brazilian market.

The BJD business was reclassified as held for sale in the third quarter of 2024. At that time, a reversal of $38 million in allowance for credit losses and a $53 million valuation allowance was recorded. In October 2024, the valuation allowance on assets held for sale increased to $97 million. The net impact of these entries was a pretax and after-tax loss of $44 million and $59 million recorded in "Selling, administrative and general expenses" in the three months and fiscal year ended October 27, 2024, respectively.

2023

Russian Roadbuilding Sale

In the fourth quarter of 2023, the company sold its Russian roadbuilding business, recognizing a loss of $18 million (pretax and after-tax). The loss was recorded in "Other operating expenses" in the construction and forestry segment.

Brazil Tax Ruling

In the third quarter of 2023, the Brazil Superior Court of Justice published a favorable tax ruling regarding taxability of local incentives, which allowed the company to record a $243 million reduction in the provision for income taxes and $47 million of interest income.

Financial Services Financing Incentives Correction

In the second quarter of 2023, the company corrected the accounting treatment for financing incentives offered to John Deere dealers, which impacted the timing of expense recognition and the presentation of incentive costs in the consolidated financial statements. The cumulative effect of this correction, $173 million pretax ($135 million after-tax), was recorded in the second quarter of 2023 in "Selling, administrative and general expenses" by financial services.

Summary of 2024 and 2023 Special Items

The following table summarizes the operating profit impact, in millions of dollars, of the special items recorded for the three months and fiscal years ended October 27, 2024 and October 29, 2023: