Deere Reports First-Quarter Earnings of $204 Million



    
    - Company remains solidly profitable despite global economic pressures.

    - Markets for agricultural equipment in U.S. and Canada continue to show
    strength.

    - Construction and forestry posts profit in spite of weak conditions.

    - Company's access to capital markets helps ensure financing availability
    for customers.

    
    MOLINE, Ill., Feb. 18 /CNW/ -- Deere & Company today announced worldwide
net income of $203.9 million, or $0.48 per share, for the first quarter ended
January 31, compared with $369.1 million, or $0.83 per share, for the same
period last year. Worldwide net sales and revenues decreased 1 percent, to
$5.146 billion, for the first quarter compared with $5.201 billion a year ago.
Net sales of the equipment operations were $4.560 billion for the period
compared with $4.531 billion last year.
    
    (Logo:  http://www.newscom.com/cgi-bin/prnh/20030326/JOHNDEERELOGO)
    
    "During a period of considerable economic uncertainty, John Deere has
completed another profitable quarter and sees further opportunities to advance
its global competitive position," said Robert W. Lane, chairman and chief
executive officer. "At the same time, ongoing higher material costs, the
deepening global recession, and volatile foreign exchange rates have put
downward pressure on our financial results." Demand for large productive
agricultural machinery has held up well, Lane noted, due in substantial part
to the sound financial health of the U.S. farm sector. Also of benefit has
been the company's access to global capital markets, which is helping ensure
that ample financing remains available for many customers. During the quarter,
Deere's credit operations obtained funding that exceeded all maturing medium-
term notes and asset-backed securities for the entire fiscal year.
    
    Summary of Operations
    
    Net sales of the worldwide equipment operations increased 1 percent for
the quarter. Included were price changes of 6 percent offset by an unfavorable
currency-translation effect of 6 percent. Equipment net sales in the United
States and Canada increased 1 percent for the quarter. Net sales outside the
United States and Canada were unchanged for the quarter, including an
unfavorable currency-translation effect of 14 percent.
    Deere's equipment operations reported operating profit of $307 million
for the quarter compared with $457 million last year. The deterioration was
due largely to increased raw material costs and unfavorable effects of
volatile foreign-currency exchange, partially offset by improved price
realization.
    The company's focus on rigorous asset management continued to produce
improved results. Trade receivables and inventories at the end of the quarter
were $7.312 billion, or 28 percent of previous 12-month sales, compared with
$6.488 billion, or 29 percent of sales, a year ago.
    Financial services reported net income of $46.8 million for the quarter
compared with $97.7 million last year. Results were lower primarily due to
narrower financing spreads, lower commissions from crop insurance and a higher
provision for credit losses.
    
    Company Outlook & Summary
    
    The outlook for the coming year remains unusually uncertain, especially
with respect to foreign exchange, and the outlook's impact on the company's
sales and earnings difficult to assess.
    Company equipment sales are projected to be down about 8 percent for the
full year and down about 9 percent for the second quarter. Included is a
negative currency-translation impact of about 6 percent for both the year and
second quarter. Deere's net income is expected to be about $1.5 billion for
2009, with more risk on the downside at this time. The company is suspending
its practice of providing a quarterly net income forecast in light of highly
uncertain conditions in the global economy, including volatility in foreign
exchange rates.
    "Deere's investment in advanced technology and its emphasis on
disciplined asset management should help the company meet present economic
challenges while extending its strong global position," Lane said. "Though
restrained by the current recession, positive trends that support our
businesses, such as global demand for food and infrastructure, remain intact
in our view and continue to hold great promise."
    
    Equipment Division Performance
    
    Agricultural.  Agricultural equipment sales were up 18 percent for the
quarter, largely due to higher shipment volumes and improved price
realization, partially offset by the unfavorable effects of currency
translation. Operating profit was $348 million for the quarter, compared with
$332 million last year. Contributing to operating profit was improved price
realization and the favorable impact of higher shipment and production
volumes, partially offset by higher raw material costs.  Also having a
negative impact on operating profit was sharp volatility in foreign-currency
exchange.
    Commercial & Consumer.  Sales for the commercial and consumer equipment
division declined 25 percent for the first quarter. The division had an
operating loss of $59 million for the period, compared with last year's
operating profit of $8 million. The decline was due primarily to the
unfavorable impact of lower shipment and production volumes and higher raw
material costs, partially offset by lower selling, administrative and general
expenses and improved price realization.
    Construction & Forestry.  Sales were down 28 percent for the quarter,
with operating profit of $18 million versus $117 million a year ago. The
profit decrease was due primarily to the unfavorable impact of lower shipment
and production volumes and higher raw material costs, partially offset by
improved price realization and lower selling, administrative and general
expenses.
    
    Market Conditions & Outlook
    
    As previously cited, the outlook for the coming year remains unusually
uncertain, particularly with respect to foreign exchange. The outlook's impact
on the company's three equipment businesses and on the net income of the
credit operation is difficult to assess.
    Agricultural.  Worldwide sales of the company's agricultural equipment
are forecast to decrease by about 2 percent for full-year 2009. This includes
a negative currency-translation impact of about 7 percent. Farm-machinery
industry sales in the United States and Canada are forecast to be flat to up 5
percent for the year, led by an increase in large tractors and combines. The
company expects agricultural commodity prices to remain healthy in 2009 and
for fuel and fertilizer costs to moderate. Sales of certain types of equipment
are expected to be down significantly for the year. These include small
tractors, cotton equipment, and machinery used by livestock producers.
    In other parts of the world, industry sales are expected to be generally
lower as a result of deteriorating economic conditions, credit cost and
availability, and changes in currency values. In addition, sales in parts of
Australia and South America are expected to be hurt by drought. On this basis,
industry sales in Western Europe are forecast to be down 10 to 15 percent for
the year, while sales are expected to decline significantly in Central Europe
and the CIS (Commonwealth of Independent States) countries, including Russia.
In South America, industry sales are projected to be lower by 15 to 25
percent.
    Commercial & Consumer.  Reflecting the U.S. housing slump and
recessionary economic conditions, commercial and consumer equipment division
sales are projected to be down about 14 percent for the year.
    Construction & Forestry.  Largely as a consequence of a slumping global
economy and historically low levels of construction activity in the United
States, Deere's worldwide sales of construction and forestry equipment are
forecast to decline by approximately 24 percent for the year. The outlook
includes a substantially lower level of global forestry equipment sales as a
result of the economic slowdown.
    Credit.  Full-year 2009 net income for Deere's credit operations is
forecast to be approximately $250 million. The forecast decrease from 2008 is
primarily due to narrower financing spreads related to the current funding
environment, a higher provision for credit losses and lower commissions from
crop insurance.
    
    John Deere Capital Corporation
    
    The following is disclosed on behalf of the company's credit subsidiary,
John Deere Capital Corporation (JDCC), in connection with the disclosure
requirements applicable to its periodic issuance of debt securities in the
public market.
    JDCC's net income was $35.0 million for the first quarter, compared with
net income of $77.2 million last year. Results were lower primarily due to
narrower financing spreads, lower commissions from crop insurance and an
increase in the provision for credit losses.
    Net receivables and leases financed by JDCC were $18.459 billion at
January 31, 2009, compared with $18.261 billion last year. Net receivables and
leases administered, which include receivables administered but not owned,
totaled $18.628 billion at January 31, 2009, compared with $18.470 billion a
year ago.
    
    Safe Harbor Statement
    
    Safe Harbor Statement under the Private Securities Litigation Reform Act
of 1995:  Statements under "Company Outlook and Summary," "Market Conditions &
Outlook," and other statements herein that relate to future operating periods
are subject to important risks and uncertainties that could cause actual
results to differ materially.  Some of these risks and uncertainties could
affect particular lines of business, while others could affect all of the
Company's businesses.
    Forward-looking statements involve certain factors that are subject to
change, including for the Company's agricultural equipment segment the many
interrelated factors that affect farmers' confidence.  These factors include
worldwide economic conditions, demand for agricultural products, world grain
stocks, weather conditions, soil conditions, harvest yields, prices for
commodities and livestock, crop and livestock production expenses,
availability of transport for crops, the growth of non-food uses for some
crops (including ethanol and bio-energy production), real estate values,
available acreage for farming, the land ownership policies of various
governments, changes in government farm programs and policies (including those
in the U.S. and Brazil), international reaction to such programs, global trade
agreements, animal diseases and their effects on poultry and beef consumption
and prices (including avian flu and bovine spongiform encephalopathy, commonly
known as "mad cow" disease), crop pests and diseases (including Asian rust),
and the level of farm product exports (including concerns about genetically
modified organisms).
    Factors affecting the outlook for the Company's commercial and consumer
equipment segment include general economic conditions, consumer confidence,
weather conditions, customer profitability, consumer borrowing patterns,
consumer purchasing preferences, housing starts, infrastructure investment,
spending by municipalities and golf courses, and consumable input costs.
    General economic conditions, consumer spending patterns, real estate and
housing prices, the number of housing starts and interest rates are especially
important to sales of the Company's construction equipment.  The levels of
public and non-residential construction also impact the results of the
Company's construction and forestry segment.  Prices for pulp, lumber and
structural panels are important to sales of forestry equipment.
    All of the Company's businesses and its reported results are affected by
general economic conditions in, and the political and social stability of, the
global markets in which the Company operates, especially material changes in
economic activity in these markets; customer confidence in the general
economic conditions; foreign currency exchange rates, especially fluctuations
in the value of the U.S. dollar, interest rates and inflation and deflation
rates; capital market disruptions; significant changes in capital market
liquidity, access to capital and associated funding costs; changes in and the
impact of governmental banking, monetary and fiscal policies and governmental
programs in particular jurisdictions or for the benefit of certain sectors;
actions by rating agencies; customer access to capital for purchases of the
Company's products and borrowing and repayment practices, the number and size
of customer loan delinquencies and defaults, and the sub-prime credit market
crises; changes in the market values of investment assets; production, design
and technological difficulties, including capacity and supply constraints and
prices; the availability and prices of strategically sourced materials,
components and whole goods; delays or disruptions in the Company's supply
chain due to weather, natural disasters or financial hardship or the loss of
liquidity by suppliers (including common suppliers with the automotive
industry); start-up of new plants and new products; the success of new product
initiatives and customer acceptance of new products; oil and energy prices and
supplies; the availability and cost of freight; trade, monetary and fiscal
policies of various countries (including protectionist policies that disrupt
international commerce); wars and other international conflicts and the threat
thereof; actions by the U.S. Federal Reserve Board and other central banks;
actions by the U.S. Securities and Exchange Commission; actions by
environmental, health and safety regulatory agencies, including those related
to engine emissions (in particular Tier 4 emission requirements), noise and
the risk of climate change; actions by other regulatory bodies; actions of
competitors in the various industries in which the Company competes,
particularly price discounting; dealer practices especially as to levels of
new and used field inventories; labor relations and regulations; changes to
accounting standards; changes in tax rates and regulations; the effects of, or
response to, terrorism; and changes in laws and regulations affecting the
sectors in which the Company operates.  The spread of major epidemics
(including influenza, SARS, fevers and other viruses) also could affect
Company results.  Changes in weather patterns could impact customer operations
and Company results.  Company results are also affected by changes in the
level of employee retirement benefits, changes in market values of investment
assets and the level of interest rates, which impact retirement benefit costs,
and significant changes in health care costs.  Other factors that could affect
results are acquisitions and divestitures of businesses, the integration of
new businesses, changes in Company declared dividends and common stock
issuances and repurchases.
    With respect to the current global economic downturn, changes in
governmental banking, monetary and fiscal policies to restore liquidity and
increase the availability of credit may not be effective and could have a
material impact on the Company's customers and markets.  Recent significant
changes in market liquidity conditions could impact access to funding and
associated funding costs, which could reduce the Company's earnings and cash
flows.  The Company's investment management operations could be impaired by
changes in the equity and bond markets, which would negatively affect
earnings.
    General economic conditions can affect the demand for the Company's
equipment as well. Current negative economic conditions and outlook have
dampened demand for certain equipment.  Furthermore, governmental programs
providing assistance to certain industries or sectors could negatively impact
the Company's competitive position.
    The current economic downturn and market volatility have adversely
affected the financial industry in which John Deere Capital Corporation
(Capital Corporation) operates.  Capital Corporation's liquidity and ongoing
profitability depend largely on timely access to capital to meet future cash
flow requirements and fund operations and the costs associated with engaging
in diversified funding activities and to fund purchases of the Company's
products.  If current levels of market disruption and volatility continue or
worsen or access to governmental liquidity programs decreases, funding could
be unavailable or insufficient.  Additionally, under current market conditions
customer confidence levels may result in declines in credit applications and
increases in delinquencies and default rates, which could materially impact
Capital Corporation's write-offs and provisions for credit losses.
    The Company's outlook is based upon assumptions relating to the factors
described above, which are sometimes based upon estimates and data prepared by
government agencies.  Such estimates and data are often revised.  The Company,
except as required by law, undertakes no obligation to update or revise its
outlook, whether as a result of new developments or otherwise.  Further
information concerning the Company and its businesses, including factors that
potentially could materially affect the Company's financial results, is
included in the Company's most recent annual report on Form 10-K (including
the factors discussed in Item 1A. Risk Factors) and other filings with the
U.S. Securities and Exchange Commission.



    
                       First Quarter 2009 Press Release
                           (in millions of dollars)
    

    
                                               Three Months Ended
                                                   January 31
                                                                       %
                                       2009            2008          Change
    Net sales and revenues:
      Agricultural equipment
       net sales                     $3,261          $2,758           +18
      Commercial and consumer
       equipment net sales              558             743           -25
      Construction and forestry
       net sales                        741           1,030           -28
    

    
        Total net sales *             4,560           4,531            +1
      Credit revenues                   474             550           -14
      Other revenues                    112             120            -7
    

    
        Total net sales
         and revenues *              $5,146          $5,201            -1
    

    
    Operating profit (loss): **
      Agricultural equipment           $348            $332            +5
      Commercial and consumer
       equipment                        (59)              8
      Construction and forestry          18             117           -85
      Credit                             53             133           -60
      Other                               4               3           +33
        Total operating profit *        364             593           -39
    Interest, corporate expenses
     and income taxes                  (160)           (224)          -29
        Net income                     $204            $369           -45
    

    
    * Includes equipment
       operations outside the
       U.S. and Canada as follows:
        Net sales                    $1,817          $1,808
        Operating profit                $79            $210           -62
    

    
        The company views its operations as consisting of two geographic
        areas, the "U.S. and Canada", and "outside the U.S. and Canada".
    

    
    ** Operating profit is income from continuing operations before external
       interest expense, certain foreign exchange gains and losses, income
       taxes and corporate expenses.However, operating profit of the credit
       segment includes the effect of interest expense and foreign exchange
       gains or losses.

    




For further information:

For further information: Ken Golden, Director, Strategic Public
Relations of Deere & Company, +1-309-765-5678 Web Site: http://www.deere.com


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